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Who can make CD beneficiary changes?

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Dear Dr. Don,
Can a beneficiary on a CD be changed without necessitating a withdrawal? Would withdrawing a CD that has two years remaining at 4.25 percent have a lower penalty inasmuch as the interest rates for CDs are so low today that doing so would be in the bank’s favor?

My husband was declared incompetent due to Alzheimer’s. The problem came about when he named beneficiaries other than his wife of 30 years on the CD.
— Helen Heires

Dear Helen,
Changing the beneficiary on a CD may necessitate closing the account and paying a penalty for early withdrawal of the funds. A CD titled with a payable on death (POD) named beneficiary is likely to be considered a contract, and a change in title could terminate the existing account relationship.

In this situation, it would be the bank’s decision whether to allow the change while keeping the rate and remaining term of the CD in force.

Changing the POD-named beneficiary when the CD matures is a simpler matter because the bank and the depositor are entering into a new contract. If your husband is the primary account holder and he’s been declared incompetent, then the requested change in beneficiaries would have to come from either his guardian/conservator, or the person holding a durable power of attorney for his financial affairs.

If you haven’t done so already, talk to the bank’s manager about the account and the requested change of beneficiary. He should know the applicable banking law concerning the CD contract.

Alternately, you could discuss it with your attorney.

I understand your point about how closing the account works in the bank’s favor and that it seems unfair to be charged a penalty for early withdrawal. You’ll have to sell it to the bank manager, not me, to get the penalty waived if you can’t get the beneficiary changed and feel it’s prudent to close the account.

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