What is a beneficiary account?
Lets discuss What is a beneficiary account?, From the name itself, it must be known that this account proves to be beneficial for you, there is no loss from it. That’s why this is known as a beneficiary account which not only gives service to you when you are alive but after your death proves to be beneficial for your family as well. The beneficiary account is like savings for a beneficiary person that can be utilized after you will be no more in this world.
Whether it is a savings account, checking account, money market account, or other, it is only your decision as to which account you would like to convert into a beneficiary before your death. But the beneficiary conversion process is always kept secret from everyone and this process is completed when you feel that their end is nearing. Will is the last proof that tells the bank and your family who is the real beneficiary owner of the beneficiary account when you are dead.
What does an open beneficiary account mean?
A Beneficiary account is a place of emergency funds in the form of assets and capital that proves as a security for the person (chosen by you to withdraw all the funds) when you die. This account is all about benefits if you convert your existing account into a beneficiary account or POD (payable on death) so that the selected person for the beneficiary can use emergency funds after your death.
Beneficiary funds are not unique or an independent account that is created individually, rather it is created on other bank accounts like savings and checking accounts, CD accounts, and more.
|[An emergency fund that can be accessed only after your death. That funds can be found in any form such as bonds, cash, assets. The main motive of using your secured funds is to cover all financial liabilities like mortgage loan, education loan, personal loan and fulfill daily personal as well as home expenses].|
Payable on Death (POD)
What do you understand about POD? If you want to take advantage of a POD account, you have to convert your investment account (such as a savings account, money market account, checking account) into a POD account so that your bank funds can be easily accessed by your nominee that you will choose.
The nominee could be your family members, friends, or another third person that you have to choose but keep one thing in mind, if you are married and you choose a third person as a nominee of your account so your wife’s consent letter must be in your account as proof. If you are not married, no consent letter is needed. The nominee must be present at the time of converting your investment account into a POD account to do some legal formalities like signature and submit a copy of identity proof’s and also the nominee must have an identity proof and your death certificate to withdraw funds after your death.
How to open a beneficiary account with other bank accounts?
The Procedure is not that hard as opening a living trust account, it contains a simple and direct procedure in which:
- You need to make a major decision that is to find the right person who can withdraw the funds from your account to cover financial transactions or meet other expenses after your death.
- Next, you need to cross the paperwork that should be completed to open a beneficiary account or convert it into a POD account. The paperwork does not contain higher-level documents or complex documents, it contains simple documents like the nominee person’s name, their identity proof, running mobile number, email address, residence address. These things are required at the time of converting into a beneficiary bank account. The beneficiary person or nominee needs to be present with your death certificate and other above-discussed documents to show proof to the bank that your will is active and valid so that your chosen nominee can access the fund which is called a probate process.
- If the bank surveys the death certificates and approves it, then the beneficiary account holder can withdraw the funds from your account in a hard situation.
- All the expenses that are incurred to take the authority of your account, all are paid from your secured funds in your account. The expenses are like lawyer’s fees.
Rules for using a beneficiary account
Here are some rules for using a beneficiary account that must be followed by the nominee :
Rule -1: Keep in mind that no right is given to the nominee like having a PIN code and account number and all, he just has a right to receive the money from the bank. After receiving all the funds, the nominee or beneficiary person will not have any relation with that account anymore.
Rule -2: Note: After your death, the person can withdraw the funds only, not credit the funds in your account. He will not have the authority to continue your account. After accessing or withdrawing all the funds, the account will be closed permanently by the bank.
Rule-3: After your death, the account will not be either a savings account, checking account, money market accounts, CD account, joint account, or anyone else due to being converted into a beneficiary account.
Rule-4: If a will is valid, the bank funds are passed into the beneficiary person’s account automatically which is called a probate proceeding.
Rule-5: The beneficiary person is the only real owner of the bank money, no creditors of yours can access the money from the beneficiary account.
Rule-6: The beneficiary person will pay all taxes that you didn’t pay.
If you want to transfer into a beneficiary account onto these accounts such as CD, saving account, checking account, IRA accounts you need to follow the same procedure. Otherwise, you can’t secure your funds for your family after your death and your secured funds will lose under your family’s hands.
Benefits of having a beneficiary account
Having a beneficiary account is a safeguard for you and your chosen person as a nominee.
- You always try to secure the financial life of your family through savings funds or other investments like IRA (Individual retirement accounts) so that your family cannot depend on others in your absence. But to give the authority to your family to access the bank funds after your death, it is only possible when you convert your investment account into a POD account or beneficiary account.
- The beneficiary person is also known as a nominee, who takes the funds authority after your death.
- With a beneficiary number, the beneficiary person or nominee can access the funds. With those funds, they will bear all your liabilities.
- Funds are received only by the beneficiary person, no third person can interfere.