If you're a CD beneficiary, you must typically provide a death certificate and proof of identity to claim the CD's funds. You may be able to choose between leaving the funds in the CD or withdrawing the money to use as you choose, which could include opening a new CD. You will also be responsible for paying taxes on any interest the CD earns after the deceased owner's passing. Learn more about CD rules for beneficiaries.

CD Accounts and CD Beneficiaries

Banks, credit unions, and online banks offer certificate of deposit (CD) accounts where consumers deposit money for a set time period (such as 3 or 12 months) to earn interest. After the CD matures, the original deposit and the interest can be withdrawn or rolled into a new CD. Taking money out before the term ends (reaches maturity) could lead to a penalty, typically a few months of interest.

When opening a CD account, you decide whether you want to name a 澳洲幸运5官方开奖结果体彩网:beneficiary for your CD account. A beneficiary is someone you name to inherit the account if or 澳洲幸运5官方开奖结果体彩网:when the original CD owner dies.

You may choose one beneficiary for the whole CD amount or multiple beneficiaries and determine pe🌺rcentages. For instance, you could name three people to inherit൲ a CD, each inheriting a 33% share of the balance.

You may also be able to name contingent (or backup) beneficiaries if the first beneficiary passes away. With a payable on death (POD) bank account, the people you name will receive your CD funds, as you explain, even if you don't have a will or your will's statements conflict with your named beneficiaries.

Beneficiaries can be family members or even organizations you want to support. You can change beneficiaries whenever you want and name new beneficiaries. Often, you can do this within your financial institution's online account management.

If you don't name a beneficiary, your 澳洲幸运5官方开奖结果体彩网:CD may need to go through probate, a time-intensive court process that decides where the money goes.

What You Need to Name a CD Beneficiary

The bank may ask you to provide the beneficiary's:

• Full legal name
• Relationship to you
• Social Security number or other tax identification number
• Date of birth
• Address
• Phone number
  

Rights of CD Beneficiaries

While you're living, the beneficiary has no claim on your CD account. But after your death, the CD beneficiary can inherit CD funds and withdraw money from the account, including your original deposit and the interest earned.

This typically means contacting the financial institution where the CDs are held and offering proof of identity. The bank may also need to see a copy of the account owner's death certificate.

The bank may ask you to complete a notarized document called a beneficiary letter of instruction. This document outlines where you want the funds sent or transferred.

What happens next depends on the bank and its policies. Generally, banks can handle CDs belonging to a deceased account owner in two ways: 澳洲幸运5官方开奖结果体彩网:Close the CD and pay out the balance to the ౠbeneficiary, or transfer or conver✃t ownership of the CD to the beneficiary.

Closing the CD

Federal regulations allow an exception to early withdrawal penalties upon the death of an account holder, even if the CD hasn't yet reached maturity. However, the exception isn't a requirement, so the penalty may still be charged.

To qualify for the withdrawal penalty waiver, you will likely need to present the death c𝐆ertificate of the original CD a🌸ccount holder.

If you inherit a CD as a beneficiary and the bank closes the account, you can decide whether to open a new CD with the proceeds or 澳洲幸运5官方开奖结果体彩网:use the money for something else. You may be able to find 澳洲幸运5官方开奖结果体彩网:better CD rates elsewhere or use the money to♈ pay off debt or make home repairs.

Remember that you may not get the entire amount of the CD but rather the amount minus any fees and outstanding debt the decease✤d owed.

Transferring a CD to a Beneficiary

Transferring ownership of inherited CDs means you don't have to move the money anywhere else. Once the account has been transferred to you, you could name one or more beneficiaries. You might consider a transfer of ownership if it would allow you to avoid an early withdrawal penalty or if you don't have a pressing need to use the money.

Transferring the CD can also make sense if the CD has locked in a higher 澳洲幸运5官方开奖结果体彩网:long-term guaranteed interest rate than what you could find by shopping around.

Tax Rules for CD Beneficiaries

Interest earned on CD accounts is taxable, but who pays when the account owner dies? Generally, interest earned before the account owner's death is not taxable to the beneficiary or the original amount deposited. But any interest earned after the account owner's death would be taxable for beneficiaries.

How much this impacts your tax situation can depend on the CD's interest earnings. If the account balance is relatively small, the interest may be negligible. But if you're inheriting 澳洲幸运5官方开奖结果体彩网:jumbo CDs with a six-figure balance, you co𝔍uld be looking at a larger tax bill for the earnings.

Talking to a tax professional may be helpful if you're listed as the beneficiary of one or more CD accounts. They can give you insight into how your tax liability may be affected if you inherit CDs and suggest strategies for minimizing those taxes.

Frequently Asked Questions (FAQs)

The Bottom Line

Adding a beneficiary to a CD account can offer peace of mind if you're worried about your savings should something happen to you. When naming a beneficiary, consider who you'd like to inherit your CD funds. And if you're the beneficiary of a CD, it's helpful to understand your rights and responsibilities.