Why have a beneficiary

By naming your beneficiaries, you ensure that your money goes where you intend for it to go. Without clear directions as to your wishes, executors or the state will follow only what the law says in distributing your assets. You can add a single primary beneficiary who receives the full account or multiple primary beneficiaries, who may each receive a percentage of the account, as designated by you. In addition, you may add contingent beneficiaries to the account, in case of the death of one of the primary beneficiaries in the interim since you named them.

Probate can take months before the courts name an executor to handle the estate, and a lot can happen in the interim, says Armstrong. It created more reporting issues for the probate process than was necessary.

It can be worthwhile to recheck your financial accounts to make sure that they have up-to-date beneficiary designations. People go in and out of them — for a variety of reasons — and you may want other people to inherit your money rather than the original designees. Knight, an attorney in Chicago. The big exception to this is k s, IRAs and other tax-deferred accounts.

With online accounts this process is simple and can be done each year around tax time, when you typically have to access the accounts anyway. With other accounts, you may have to call up the institution and confirm your designations. In either case, if you want to change your designee, the institution will clearly lay out the process for you to do so.

You want to be sure that your estate plan is clear on who gets which assets, and avoids potentially conflicting directions. Naming a beneficiary and staying on top of your affairs not only helps your surviving family deal with your estate more easily, but it also helps them avoid acrimonious fights.

With clearly named beneficiaries, you can help your family understand exactly what your wishes are and avoid the infighting that too often comes when a relative leaves assets to family members.

Naming a beneficiary is an easy thing to skip over when opening an account, but this small step can save a huge headache — and potentially a lot of money — later on. So take an inventory of your financial accounts today, and ensure that your wishes are up to date.

Then resolve to keep the accounts updated annually so that you continue to avoid problems for yourself and your heirs. How We Make Money. James Royal. Written by. Bankrate senior reporter James F. Royal, Ph. This is why carefully designating and remembering to update beneficiaries is so important.

If you are worried about making a mistake when naming your beneficiaries, consult a financial professional or attorney to ensure your intentions will be carried out the way you wish.

Insurance companies may have limits on the amount you are able to designate to a charity based on your past giving history to the organization. Life insurance products contain fees, such as mortality and expense charges which may increase over time , and may contain restrictions, such as surrender periods. The website you are being directed to is not created by Securian Financial Group, Inc.

The new website may be subject to privacy policies, security policies and terms and conditions different from those at Securian Financial Group. Skip to main content. Insurance and protection, End of life planning September 10, Your name. Your email address. Send to. Message optional. Thank you for sharing Your message has been sent. What is a beneficiary? Primary and contingent beneficiaries There are two types of beneficiaries: primary and contingent. Why do I need to name a beneficiary?

What happens if I don't name a beneficiary? How to name a beneficiary Most financial services companies provide a form or website for you to designate your beneficiary so they have it on file with your other account or policy information. What information do I need to provide? Can anyone be named as a beneficiary?

Your beneficiary can be a person, a charity, a trust, or your estate. Immediate family as beneficiaries Anyone who will suffer financially by your loss is likely your first choice for a beneficiary. Naming minors as beneficiaries Children under age 18 can be named as a primary or contingent beneficiary.

Special needs and other lifelong dependents as beneficiaries It would seem logical to name someone who will need financial support throughout their lifetime as your beneficiary, but doing so could make them ineligible to receive government assistance — which might mean a significant loss in financial support for them.

Naming charities or organizations as beneficiaries Many people name charities and other cause-related organizations as beneficiaries. When to update your beneficiaries Beneficiary changes are often overlooked following divorce, remarriage or after the death of a loved one who may be listed as one of your beneficiaries.

Special circumstances for changing beneficiaries In some circumstances — like in specific terms of a divorce or if you made what's called an "irrevocable designation" — you may not be able to change or name a new beneficiary without getting your current beneficiary's consent. Can the wrong person receive your benefits? Get articles like this delivered directly to your inbox. Sign up. Actively scan device characteristics for identification. Use precise geolocation data.

Select personalised content. Create a personalised content profile. Measure ad performance. Select basic ads. Create a personalised ads profile. Select personalised ads. Apply market research to generate audience insights.

Measure content performance. Develop and improve products. List of Partners vendors. In the financial world, a beneficiary typically refers to someone eligible to receive distributions from a trust, will, or life insurance policy. Beneficiaries are either named specifically in these documents or have met the stipulations that make them eligible for whatever distribution is specified.

Typically, any person or entity can be named a beneficiary of a trust, will, or life insurance policy. The individual distributing the funds, or the benefactor, can put various stipulations on the disbursement of funds, such as the beneficiary attaining a certain age or being married.

Also, there can be tax consequences to the beneficiary. For example, while the principal of most life insurance policies is not taxed, the accrued interest might be taxed. One of the most important things to determine after retiring, if not before, is that all assets will end up in the right hands.

Qualified retirement plans, like a k or an individual retirement account , IRA , give the account holder the ability to designate a beneficiary. If the beneficiary is not the spouse, then there are three different options for distribution. Only the lump-sum and five-year rule options are available going forward. If the beneficiary is either an estate or a trust, then the distribution rules are more limited.

Any proceeds left to the estate also make it subject to probate. Life insurance proceeds are considered tax-free to the beneficiary and are not reported as gross income.