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Certificates of deposit and inheritance

On Behalf of | Aug 5, 2022 | Will |

In estate planning for South Carolina families, it is usually a good idea to keep assets out of the probate process. Probate is a slow and sometimes expensive court procedure for distributing assets from a person’s estate to their heirs, and shielding assets from probate can transfer them to those heirs much faster.

CDs and probate

A CD, or certificate of deposit, is a low-risk, low-reward investment vehicle that many banks offer. They are similar to a bond in that they provide a flow of future payments in exchange for investing up front. CDs work a lot like other financial assets when it comes to determining whether or not they should go through probate. To keep it out of probate, it is necessary to make it clear legally and explicitly where the CDs should go when the time comes. There are two ways to do this.

Indicating heirs for a CD

The first method is common for spouses, but anyone can do it: Set up the CD in a joint account. When one of the people on the account passes away, the CD will automatically become owned by the other owner on the account. The other method is to tell the bank in advance that you want the CD to be “payable on death” and specify who you would like the heir for the CD to be. That way, if the holder dies, the named heir will get the CD without it having to go through probate.

A CD does not need to go through probate during death, and with the right planning, transferring it to the right heir can be fast and easy.