Making a will is an important part of personal finance, and it’s something that everyone should do. But did you know that you can also name a beneficiary for your bank account? This is another option to consider when planning for the future.
In this article, we will compare bank account beneficiaries to wills, and look at the advantages and disadvantages of each.
Bank Account Beneficiary Vs Will Table of Contents
What is a Bank Account Beneficiary?
A bank account beneficiary is somebody who you name to receive the money in your account after you die. You can name anybody as a beneficiary, including family members, friends, or even organizations.
What is a Will?
A will is a legal document that dictates how your assets will be distributed after you die. You can use a will to leave your property, possessions, and money to whomever you choose.
Wills are typically created by an attorney and must be signed by witnesses in order to be valid. Once you create a will, it’s important to keep it updated as your life circumstances change.
What is The Difference Between a Bank Account Beneficiary and a Will?
A will is a legal document that outlines how you want your property and assets to be distributed after you die. A bank account beneficiary, on the other hand, is someone who you designate to receive the money in your bank account upon your death.
So, what’s the difference between a bank account beneficiary and a will?
The main difference is that a will goes into effect after you die, while a bank account beneficiary designation takes effect immediately upon your death.
Another key difference is that a will must be Probated by the court, which can take months or even years. A bank account beneficiary designation, on the other hand, does not have to go through Probate.
So, if you want your loved ones to have access to your bank account as soon as possible after you die, then you should designate a bank account beneficiary.
What Are The Different Types of Bank Account Beneficiary?
There are two types of bank account beneficiary:
The primary bank account beneficiary is the first person named on the account who will receive the money in the event of the account holder’s death.
The secondary bank account beneficiary is the second person named on the account and will only receive the money if the primary beneficiary dies before the account holder.
What Are The Different Types of Will?
There are two different types of will:
Living wills are created while the person is still alive and can be changed at any time, whereas a testamentary will is only created after the person has died. Both have their own advantages and disadvantages.
A living will allows you to change your mind at any time, which can be helpful if your circumstances change. However, it can also be easy to forget about or lose track of a living will.
A testamentary will is more permanent, but it can take longer to put into place and may not reflect your final wishes if you die unexpectedly.
What Are The Advantages of a Bank Account Beneficiary?
There are a few advantages to having a bank account beneficiary.
One is that the money in the account will go directly to the beneficiary upon your death, without having to go through probate. This can save time and money, as well as provide some peace of mind knowing that your loved ones will have access to the funds right away.
Another advantage is that you can change the beneficiary at any time, without having to go through the legal process of changing your will. This can be helpful if your circumstances change and you want to ensure that your money goes to the right person.
Finally, if you have a joint bank account with someone, naming a beneficiary can help avoid any disputes that may arise about who should get the money in the event of your death.
What Are The Advantages of a Will?
There are several advantages of having a will.
One is that you can name an executor. This is the person who will be responsible for carrying out your wishes after you die. You can also name a backup executor in case the first one is unable or unwilling to do so.
Another advantage of having a will is that you can specify how you want your assets to be distributed. For example, you can leave specific items to specific people. You can also specify that certain assets are sold and the proceeds divided among your heirs.
A will can also be used to set up trusts for minor children or others who are not able to manage their own finances. Trusts can be used to provide for a child’s education, care, or other needs.
Finally, a will can be used to make charitable donations. You can specify that a certain amount of money or property is given to a charity of your choice.
What Are The Disadvantages of Bank Account Beneficiary?
The main disadvantage of bank account beneficiary is that the money in the account is not automatically transferred to the beneficiaries upon the account holder’s death.
In order for the money to be transferred, the account holder must have specifically designated the beneficiaries in their will. If no beneficiaries are designated, then the money will go through probate and may be subject to estate taxes.
Another disadvantage of bank account beneficiaries is that the account holder can change the beneficiaries at any time, without the need for a court order. This means that if the account holder wants to exclude someone from receiving their money after their death, they can simply remove them as a beneficiary.
Finally, bank account beneficiaries are not protected from creditors in the event that the account holder owes money. Creditors can garnish the account and take the money that is owed to them, even if the account holder has designated beneficiaries.
What Are The Disadvantages of Will?
While a will is a legally binding document, it can be contested in court. This means that if someone doesn’t agree with what’s in your will, they can try to have it overturned. This can be a lengthy and expensive process, so it’s something to keep in mind if you’re considering this option.
Another disadvantage of a will is that it can take time to be executed. This means that if you die suddenly, your loved ones may have to wait a while before they receive any of your assets. This can be especially true if you have a complex estate.
Finally, a will is a public document. This means that anyone can request a copy of it, and it will be available for anyone to see. This can be a concern if you want to keep your affairs private.
So, Which One Should You Use?
The answer to that question depends on a few factors. The first is whether or not you have a will. If you don’t have a will, then the answer is simple – use a bank account beneficiary.
A bank account beneficiary gives your money directly to the person or persons you’ve designated, without going through probate. This can be a big advantage, especially if you don’t have a lot of assets or if your beneficiaries are located in different states.
Another factor to consider is whether or not you want your beneficiaries to have immediate access to the money. With a will, there can be a delay of several months (or even years) before the estate is settled and the beneficiaries receive their inheritance. With a bank account beneficiary, the money is available as soon as the account is closed.
Finally, you’ll need to decide whether or not you want your beneficiaries to be able to change the designation. With a will, the beneficiaries are set in stone. Once you die, they can’t be changed (unless you have a living trust, which we’ll discuss in another post).
With a bank account beneficiary, however, the designation can be changed at any time – even after your death. This can be a good thing or a bad thing, depending on your situation.
What Are Some Alternatives to Using a Bank Account Beneficiary or a Will?
There are a few alternatives to using a bank account beneficiary or a will.
One is to use a trust. This can be either an irrevocable trust or a revocable trust. An irrevocable trust cannot be changed once it has been set up, while a revocable trust can be changed at any time.
Another alternative is to use a pay on death account. This type of account is similar to a bank account beneficiary, but the money in the account does not go through probate.
Finally, you could simply give your assets to your heirs outright. However, this may not be the best option if you have concerns about your heirs’ financial ability to manage the inheritance.
Get professional help when creating a will or setting up a trust. This is not something you should try to do on your own. There are many legal complexities involved, and it is best to have an experienced attorney handle the process for you.
If you have any questions about bank account beneficiary vs will, be sure to speak with your financial advisor or estate planning attorney. They will be able to help you decide which option is best for your unique situation.
What Are Some Tips For Using a Bank Account Beneficiary?
The first and most important tip is to make sure that you keep your beneficiary information up to date. You should review your beneficiaries at least once a year, and update them as needed. It’s also a good idea to keep a copy of your beneficiary designation form in a safe place so that it can be easily located if needed.
Another important tip is to be aware of the different types of beneficiary designations. For example, some accounts allow you to designate a primary and secondary beneficiary, while others allow you to designate multiple beneficiaries. It’s important to understand the difference so that you can make the best choices for your situation.
Finally, it’s also a good idea to talk to your beneficiaries about your wishes. This can help avoid any confusion or disagreements down the road.
What Are Some Tips For Using a Will?
If you’re going to use a will, there are some important tips to keep in mind. First, you should make sure that your will is kept in a safe place where it won’t be lost or damaged. You might want to consider keeping it in a fireproof safe or giving it to a trusted family member or friend for safekeeping.
It’s also important to keep your will up to date. If you have any major life changes, such as getting married, having children, or buying a new home, you’ll need to update your will to reflect these changes. Otherwise, your wishes may not be carried out the way you intended.
Finally, it’s a good idea to review your will periodically, just to make sure that everything is still in order and that your wishes haven’t changed. If you have any questions about how to use a will, or if you need help drafting one, you should consult with an experienced estate planning attorney.