A bank account beneficiary is someone designated to receive the assets held in a bank account after the account holder's death. Moreover, choosing a beneficiary is required to open some bank accounts. The designated beneficiary, however, can be changed by the account holder at any time.
In some cases, an account holder designates a primary bank account beneficiary and a secondary beneficiary. In this case, assets from the account will go to the primary beneficiary on the account holder's death. If the primary beneficiary is no longer living, the assets will go the secondary beneficiary.
Account holders are generally able to divide assets by appointing multiple beneficiaries. These beneficiaries are each given a certain percentage of the assets at the time of the account holder's death. This can be done for both primary and secondary beneficiaries.
The purpose of having a bank account beneficiary is to ensure that an account holder's money goes to the person or group that the account holder chooses. It also simplifies the legal process of passing money from the estate of the deceased to the intended recipients. This is of particular importance for account holders who do not possess a will.
A bank account beneficiary designation can pass the contents of a bank account separately from the rest of that person's estate. The persons designated as beneficiaries may differ from those who receive under the will. For instance, a bank account holder may make one child the account's beneficiary while the will indicates that the estate is to be divided equally between him and the other children. Unless specifically negated in the will, the bank account designation usually overrides the general instructions in the will.
While many people designate family members as beneficiaries, it is possible to designate an organization as the beneficiary. This gives account holders the option of leaving a bank account's assets to a charitable organization or religious group at the time of their passing. In these cases, various taxes may be levied on the assets.
Generally, financial advisors recommend discussing the designation of bank account beneficiaries with an estate planner and others who are concerned with a person's financial situation. This includes discussing the decision with a spouse or other family members. Prior discussion can allow for a smoother disposition of assets after the account holder's death.