Certificates of deposit, CDs are a type of illiquid savings account offered by banks and credit unions. In the past, you were given a certificate when you opened the account that contained information, such as the amount of your deposit, your name and the interest rate the issuing institution had agreed to pay on the account. To redeem your CD you had to present the certificate. Nowadays, banks no longer issue certificates and you need little if any documentation to close your account.
In 2001, the USA PATRIOT Act came into effect. Among the provisions of this homeland security bill, were rules requiring banks to establish procedures for identifying people who open and transact on accounts. The act did not specify how banks should go about establishing the identities of people, but every bank must have a written policy in place that details the security procedures. Generally, you cannot open, close or transact on an account unless you present a valid government issued form of identification. Most banks allow you to redeem your CD if you simply present your drivers license or passport.
Under federal banking regulations, account holders can name pay-on-death beneficiaries on their accounts. When you name a POD beneficiary, you turn your account into a revocable trust account, which means that the funds held in the account do not have to pass through probate when you die. To close a CD as a POD beneficiary, you must present a valid form of ID and a certified copy of the account owner’s death certificate.
In instances where an account owner dies without having named a POD beneficiary on the CD, the funds held in the account pass to the deceased account owner’s estate. After the probate hearing, the executor of the estate must provide the bank with copies of the letters of administration. These letters include instructions on how the bank should disburse the funds held in the CD. The bank must comply with the letters of administration, although, the bank may require any named beneficiary to present a valid form of ID before taking receipt of the funds.
Although banks no longer issue certificates when CDs are opened, some multi-year CDs on which certificates were issued, are still in existence. To close such an account you must provide the bank with the certificate you were given at account opening, and a valid form of ID. Technically, the bank cannot redeem the CD if you fail to produce the certificate. In reality, every bank has some kind of back-up records and the bank should allow you to close the account even if you have lost the certificate.