Beneficiary: What to consider when naming one

Naming a primary and contingent beneficiary is an easy way to help ensure a smooth transfer of assets down the road. 

Assets with a named beneficiary skip probate, the court-supervised process of settling an estate’s debts and making distributions. This process can be cumbersome and puts private affairs in the public record, so many people plan to avoid it. 

Here’s what to know about choosing beneficiaries and how to make life easier for them:

When to Select a Beneficiary 

All of your accounts, including checking, savings, CDs, 401(k)s, IRAs and taxable brokerage accounts should have a designated beneficiary. You may even be able to set up transfer on death deeds for real estate and vehicles. Life insurance policies and annuities should also have beneficiaries.

Who to Choose 

Naming your estate as beneficiary is a common mistake that can result in probate and taxes. Spouses, children, other relatives, close friends and charities are logical beneficiary choices. But in some circumstances, such as providing for a minor, it may be better to establish a trust and name the trust as a beneficiary. 

Doing this can prevent legal difficulties, avoid bestowing a windfall on someone who can’t manage it, and eliminate or minimize taxes. 

Staying Current

After naming your primary and contingent beneficiaries, revisit your choices annually and after any major life event to make sure you’re still happy with your selections. Even if your life circumstances haven’t changed, those of your beneficiaries might have. 

Someone could have passed away, meaning you need to name a new beneficiary, or someone’s financial situation might have changed.

Empowering Beneficiaries

Finally, inform your beneficiaries that you’ve chosen them. While you don’t need to disclose amounts, they do need to know how and where to claim what you’ve left them.

Have questions? Reach out anytime.