In the world of financial planning, the expression “I want (insert person’s name) added to my account” is one of the most misunderstood ideas.
There are many, many ways that someone can be added to a bank account, an investment account, an annuity, an IRA, or a 401(k). Let’s touch on a few of them.
- Beneficiary
- Adding a beneficiary is possible to an annuity, life insurance, or a retirement account. This gives the second person absolutely no right to do anything with the account except to receive it at the death of the account holder. Having a beneficiary can help speed up the transfer of accounts outside one’s estate when they pass away.
- POD or TOD (Payable on Death or Transfer on Death)
- This is more-or-less the same as having a beneficiary. It’s primarily used on non-qualified investment accounts or bank accounts. Again, this simply says where an account is to go upon the death of the account holder.
- Joint With Rights of Survivorship
- This actually grants co-ownership to the entity/person added. They can change the account as if they own the entire account themselves. They also become sole owner of the account when the other party passes away. This cannot be used in 401(k) or IRA accounts, as they can only have one owner.
- Adding signature privileges
- This is most commonly for adding the ability for a person to write checks from an account. It’s most often used when a person needs help paying bills or organizing their finances.
Trusted Contact
This is a newer designation that enables a financial firm to disclose information and even reach out to another party if necessary. The contact cannot make changes, doesn’t own the account, and isn’t the recipient on death.
There are other ways to title an account, but this is a great list to understand for starters. Before you go into your bank or visit with your financial advisor, think about what you want thisadditional person to be able to do before you ask to add their name to anything. Explain that to the professional you’re dealing with. Find the right tool for the job you want to complete.
- This is most commonly for adding the ability for a person to write checks from an account. It’s most often used when a person needs help paying bills or organizing their finances.