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The Importance of having a Beneficiary

The Importance of having a Beneficiary

July 28, 2022

A beneficiary is the person or entity that you legally designate to receive the benefits from your financial products. You are able to put a beneficiary on vehicles, bank accounts, life insurance policies and investment accounts. You are also able to name several beneficiaries and they can be whomever you choose; ranging from your spouse to a friend or charity. It is really important to make sure that you have a beneficiary because it assures that the account will go to whom you desire.  If you do not name a beneficiary on an account/ product, it will then look at your will or trust. This can take time and cost money.

Please also note that a beneficiary designation supersedes or overrides a will. For example, say you want your IRA to go directly to your daughter and list this in the will, but forget to update your beneficiary from your spouse. Your IRA will go directly to your spouse. This is why it is important to review your beneficiaries every couple of years and make sure that you still feel comfortable and confident in what they say. Divorce, death, marriages, births and any other lifetime events are also reasons to check on beneficiary designations.

Wills and beneficiary designations both provide instructions for the distribution of assets, so what’s the difference? A will provides instructions for all of the assets included in your estate, whereas a beneficiary designation is for a specific asset. Assets with beneficiary designations get excluded from the estate by default. As stated above, you are able to put beneficiaries on vehicles, bank accounts, life insurance policies and investment accounts but we typically see life insurance policies and investment accounts with beneficiaries and everything else looks at the will/ trust. It may be helpful to consider adding a beneficiary to your vehicle or a POD to your bank account going forward. We recommend that you talk with your attorney on the plan that is best for you.