Last summer Capital One changed its beneficiary policy for 360 deposit accounts by allowing customers to designate up to 10 beneficiaries to each account. As I mentioned in my July blog post, one issue with the new policy was that customers could only add and manage beneficiaries with a paper form which not only had to be mailed/faxed, but it also had to be notarized. I’m happy to report that Capital One has added an online management feature that allows customers to add beneficiaries to their accounts online.
Unfortunately, not everyone in the nation can take advantage of adding beneficiaries online. According to Capital One’s support center, “Customers residing in the states of New York or Louisiana can view existing beneficiaries, but must submit a notarized form to make any changes.” If you live in those states or if you prefer to do things by mail, you can download the beneficiary form from Capital One’s support center.
Up to 10 beneficiaries can be added to each account. Once beneficiaries are named, the bank account will be referred to as a "Payable on Death" (POD) account.
Capital One’s New Online Beneficiary Management System
To add a beneficiary online, customers must first log into capitalone.com, and then select the account. From there, select “Account Services & Settings” menu and then click on “Manage Beneficiaries”. Capital One will then provide the following information:
Add Beneficiaries to Your Account
Your beneficiaries are the people who will receive the money left in your account when you and any other account owners pass away. You can designate up to 10 individuals as beneficiaries on each account. When all account holders pass away, we will distribute the remaining funds in equal shares. Until then, beneficiaries cannot perform transactions or view your account.
Any new beneficiary changes made online or by paper form will revoke all prior death beneficiary designations that you made for this account. Make sure that your most recent beneficiary designations for this account are listed here.
Select the “Add a Beneficiary” button, and an online form will be displayed. Fill in the identifying information on the beneficiary, click the check box and then click the “Add a Beneficiary” button to complete the process.
After you add the beneficiary, Capital One will take you to the list of beneficiaries for that account. From there you can add additional beneficiaries or remove a beneficiary or make edits to the information on a beneficiary.
One minor issue is that I can see no easy way to designate the same beneficiary to multiple accounts. You have to type in the full identifying information of your beneficiary for each account.
Social Security Number Still Required
In addition to name, address and birthdate, the online beneficiary form requires the beneficiary’s social security number. This can be a major issue for people who don’t want to know the social security numbers of their beneficiaries. They may not be close family members, and they may not want beneficiaries to know. Also, every time a social security number is given to another person or entity, the risk of identity theft increases. That’s one reason why institutions should only request a social security number when it’s absolutely necessary, and it’s not necessary for banks to know your beneficiaries’ social security numbers when you’re still alive.
Beneficiaries Must Be Individuals
Beneficiaries can only be individuals (no charities, entities or nonprofits). That can make it more difficult if a customer is using beneficiaries to extend FDIC coverage. Not everyone may have enough family or friends who they want to be beneficiaries. Also, there is more risk in the amount of FDIC insurance coverage when a beneficiary is an individual. If that person dies, you lose the extra FDIC coverage immediately. There’s no grace period.
Background On the Capital One Beneficiary Issue
Long before Capital One acquired ING Direct, customers have been unable to designate beneficiaries on their deposit accounts. The only alternative for ING Direct/Capital One 360 customers was to register their accounts as a living trust account. This is a formal revocable trust that is typically set up by an attorney, in which the owner specifies who will receive the trust assets when the owner passes away. This isn’t a good alternative to a POD beneficiary for most people who want a quick and simple way to designate a beneficiary on a bank account.
Benefits of Designating Beneficiaries On Your Bank Accounts
There are two important reasons why you may want to designate account beneficiaries on your bank accounts. First, it can make it much easier on your heirs. When you die, the accounts don’t have to go through the probate process. This can save your heirs time and legal expenses. The beneficiary can claim the account directly at the bank or credit union. Second, it’s an easy way to extend FDIC insurance coverage. As I described in this maximizing FDIC coverage post, it’s easy to insure up to $1.25 million at one bank by using five beneficiaries.