Unlike some products and services, a bank account is one of those things that—once opened—you generally have one for the rest of your life. For a lot of people, their banking journey begins sometime during high school. They’ve just landed their first job or they’ve started driving and need a way to spend their money—notice I said “spend.”
So, they come into the bank (or apply online), sign a few bank documents, and are the proud owners of a new checking account. For many folks, until they get married or experience some other life change, this is the first and last time they think about the bank documents they signed during their account opening. Yes, we can thank iTunes for the lackadaisical way we pay attention to legal-looking documents.
When you open an account, you and the bank are entering into a contract with one another. When you sign the documents, you are telling the bank who should have access to your funds in the event that something should happen to you.
It all starts and ends with the signature card
The signature card is one of the documents you sign when you open an account. It lists the individuals who are authorized to sign checks and make decisions on the account. And, if it’s not amended from time to time, you or your loved ones could end up in a situation where your will says one thing and your bank account says something completely different. By ensuring that your accounts align with the wishes set forth in your estate plan (or will), you drastically reduce the potential for some kind of dispute—discrepancies can sometimes require the involvement of attorneys and judges.
How should you set up your accounts?
When you open an account, most banks will ask if you’d like to name beneficiaries. In the event that you pass away, the bank will disburse the funds in your account to this designated individual (or individuals). This type of account setup is sometimes referred to as “payable on death” or POD.
There are, of course, other ways to set up an account: accounts with right of survivorship, revocable trust accounts, estate accounts, and more. But, if you’re just beginning to look at your accounts and how they align with what you want to happen after you pass away, starting with named beneficiaries is a good first step.
Consider consulting with an estate planner or family attorney
One other thing to think about is the potential tax consequences your family could incur if your account ownerships are not set up properly. If you’re worried about tax implications, I’d advise that you seek legal advice from a family attorney. A family attorney or estate planner will be able to help you craft a plan that minimizes the tax impact of your estate when it passes to your family and loved ones.
So, as the years go by, make a point to periodically revisit the ownership of your bank accounts. Later down the road, your family and friends will definitely appreciate it.
About the Author:
Sue Hogg is a vice president and customer service supervisor at Central National Bank. She’s been in banking for 36 years. When she isn’t working, she enjoys spending time with her husband, Ricky, her 3 children, their spouses, and 8 grandchildren. Sue and Ricky like to travel to and spend time at their time share in Branson, Mo.