Learn how to handle bank certificates after the owner’s death
Joint Owners
If the bank certificate has joint owners and one of them passes away, the share will transfer to the other owner if they have the right of survivorship. If you are the named beneficiary on the bank certificate account, you can inherit the certificate without needing to go to court. Instead, you will typically only need to provide a copy of the deceased account holder’s death certificate, your valid identification, and a direction letter containing all important information related to the account holder and the beneficiary. Once you have the certificate, you can transfer the account into your name, withdraw funds from it, or reinvest it in a new bank certificate account.
Named Beneficiary
If the bank certificate owner officially registered you as a specific beneficiary before their death, you will be entitled to receive the full amount of the certificate, including the deposit and accrued interest. As a beneficiary, you will not need to go to court to claim the certificate. Instead, you will typically only need to provide a copy of the account holder’s death certificate, your valid identification, and a direction letter containing all important information related to the account holder and the beneficiary. Once you have the certificate, you can transfer the account into your name, withdraw funds from it, or reinvest it in a new bank certificate account.
No Named Beneficiary
If the bank certificate account does not have a named beneficiary, the funds will go to the estate of the deceased person. When the value of the estate exceeds the threshold set by the state, the heirs will have to go to court. The probate case can take anywhere from nine months to a year and a half or more. During the probate process, the executor of the will or the court-appointed representative will gather the assets, pay any expenses, and distribute the remaining estate. If there is no will or trust, inheritance laws (which vary from state to state) govern who receives the proceeds of the certificate. If there is no beneficiary and the certificate must go through probate, it is advised that you check the term of the certificate, verify early withdrawal penalties, and stop any automatic renewal agreements.
Abandoned Accounts
Deposit accounts, including bank certificates, are considered abandoned or unclaimed if there has been no activity or proactive communication from the customer for a specified period of time. This period can range from three to five years, depending on the unclaimed property laws in each state.
Once an account is deemed abandoned, banks are typically required to attempt to contact the customer. These steps can include publishing the account holder’s name in the local newspaper and sending a letter to the last known address.
If the bank does not receive a response after making the required attempts, they will transfer the funds to the state’s unclaimed property program.
Tax Implications for the Beneficiary of the Bank Certificate
The value of the bank certificate, including the deposit and accrued interest, is not subject to federal taxes when it passes to the beneficiary. However, any interest earned after the death of the original owner will be considered taxable income.
Regarding state inheritance laws, Acher said: “Each state has its own laws regarding inheritance or estate taxes, which determine whether the beneficiary of the bank certificate (or the beneficiary of the bank certificate owner’s estate) pays inheritance or estate taxes. Depending on the state, the beneficiary of the bank certificate may have to pay income tax on the inheritance from the certificate.”
FAQs
How can you add a beneficiary to your deposit certificate?
To add a beneficiary to your deposit certificate, contact the issuer of the deposit certificate and submit the request. You will typically need to provide the beneficiary’s first and last name, their home address, phone number, date of birth, country of citizenship, and Social Security number. You may be able to do this online or you may need to complete a form and have it notarized, depending on the issuer of the deposit certificate.
What
What happens if the original owner and the beneficiary die together before claiming the bank certificate?
If the original owner of the deposit certificate has died and there is no living named beneficiary to claim the certificate, it will go to inheritance and will be distributed through the probate process as if there were no beneficiary.
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Sources:
Consumer Finance Protection Bureau. “I Have a Joint Account With Someone Who Died. What Happens Now?”
Capital One. “How Do I Settle a Capital One Bank Product?”
Consumers Credit Union. “5 Things To Know About Inheriting Money.”
The Judicial Branch of California. “Wills, Estates, and Probate.”
Office of the Comptroller of the Currency. “When Is a Deposit Account Considered Abandoned or Unclaimed?”
Source: https://www.thebalancemoney.com/what-happens-when-a-cd-owner-dies-5225585
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