Some people in Washington use certificates of deposit to set aside money for a short or medium period. The benefit of these certificates is that they allow owners to earn a return on their initial investments. If you inherit one or more of these certificates, it’s understandable to feel confused about what to do next.
How people inherit certificates of deposit
Inheriting certificates of deposit might seem simple enough. However, in the world of estate administration and probate, there are a few ways for someone to gain ownership of a certificate of deposit. Since more than one person can own a certificate of deposit, otherwise called a joint account, the surviving co-owner would automatically gain full ownership of the certificate.
You can also inherit this document as a beneficiary of this certificate. Often, as a beneficiary, it will be your responsibility to notify the financial institution holding a certificate of deposit. That’s because you’ll need to provide them with proof, typically a death certificate, that the certificate’s original owner passed away.
When a sole owner of a certificate of deposit passes away and has no beneficiaries, this account typically goes through probate court.
Reinvesting inherited certificates of deposit
Whether or not you can reinvest a certificate of deposit depends on the financial institution that initially issued the document. Some institutions will allow heirs of inherited certificates to withdraw funds immediately. Other institutions have rules forcing owners of inherited certificates of deposit to wait until this document’s original maturity date arrives.
It’s understandable to wonder about the tax-related impacts of withdrawing funds from an inherited certificate of deposit. Fortunately, whether you reinvest these funds before or after a policy’s original maturity date, the money isn’t subject to income tax.