Here are five compelling arguments you should designate a beneficiary for your financial assets immediately.
Many people forget or put off adding a beneficiary to their bank or investment accounts because their financial institution doesn't prompt them to do so.
Although this may seem like a minor point, it is often the driving force behind why you maintain a financial account, such as a life insurance policy, in the first place. When you pass away, you can ease the burden on your loved ones by designating a beneficiary.
Having a designated beneficiary can simplify the management of your assets in the future for a number of reasons.
1) You want to decide who will inherit your money and property.
When you pass away, your executor will be in charge of handling your financial affairs, and naming a beneficiary will let them know exactly where your money should go. Giving to a loved one in need, a worthy cause, or a spouse are all examples.
According to Stephen Akin, a registered investment adviser at Akin Investments in Biloxi, Mississippi, "when you name beneficiaries you ensure that after you die, your assets go to the people or charities you choose."
The choice to have one's spouse act as beneficiary may appeal to some, but it's not as secure as having a designated beneficiary.
While it is common practice for spouses to leave everything to one another upon death, designating a beneficiary ensures that your assets go to the person or organization of your choosing and eliminates the need to rely on the honesty of a spouse.
San Antonio attorney Shann Chaudhry warns, "While you hope that a surviving spouse will honor your wishes even if they are not in writing, you may accidentally disinherit your children."
The account holder may name one primary beneficiary or multiple beneficiaries who may share the account in varying proportions. If the primary beneficiaries of an account pass away, are unavailable, or decline to receive the assets, the account holder can designate secondary beneficiaries to receive them.
You can designate a trust as the beneficiary of a retirement account such as an IRA, and the funds will be distributed in accordance with the terms of the trust.
If you don't name a beneficiary in your will, your assets will be distributed according to state or federal law.
The second benefit is that the probate procedure can be made easier.
Probate, the process of administering a will after a person's death, can go more quickly and easily if a beneficiary is already named. Establishing an executor and dividing up a deceased person's property are just two of the many tasks that must be completed during the probate process.
Diane M Pearson, the Pittsburgh-based firm's founder and current executrix, recently dealt with a decedent's accounts for which no beneficiaries were listed.
Because of the "considerable additional paper work" required for the distribution of these assets, She explains, "We had to open an estate account, and all distributions had to come out of the estate account. The speed with which assets can be transferred to a beneficiary is the single greatest advantage of designating a beneficiary. ”
Aside from that, if you name a beneficiary, things will be simpler for the heir you're trying to provide for.
Morris Armstrong, the head of Morris Armstrong EA in Cheshire, Connecticut, says, "Usually all you need to make a claim on an account where you are the beneficiary is ID and a copy of the death certificate."
3) There has been a shift in the makeup of your heirs
Beneficiary designations can be updated to reflect changes in beneficiaries or other circumstances. Divorcing couples, for instance, may wish to remove their former spouse as a beneficiary.
According to Russell D. Olson, "even if you're married, you can usually change the beneficiary of your accounts without your spouse's permission." Chicago divorce attorney Knight runs his own practice. This is one of the first suggestions I make to clients going through a divorce. If the court rules against you, the worst that can happen is that you have to change the beneficiary [designation] back to the spouse's name. ”
If you pass away during a divorce, your beneficiary, and not your spouse, will receive the assets. Retirement accounts that defer taxes, such as 401(k)s and IRAs, are a major outlier here. In order to make a beneficiary change on one of these, he says, "you'll need your spouse to sign off on it, as the law in the United
When naming a beneficiary, it's important to consider who you don't want to get the money as well as who you do.
With an online account, reviewing beneficiary designations is a breeze and can be done annually near tax time. When it comes to other accounts, the account holder may need to get in touch with the financial institution to verify their choices. Whenever necessary, the institution should make it easy to replace the designated representative.
Four, the people you leave your estate to take precedence over your will
An executor will first look to beneficiary designations to see who is entitled to an account before turning to the terms of a will.
According to Pearson of Pearson Financial Planning, "if an account is titled and has a beneficiary associated with it, then that beneficiary will always supersede the will."
For this reason, it is wise to have an attorney review any beneficiary changes to ensure that the new designations are consistent with the overall estate plan.
According to Texas lawyer Chaudhry, "a knowledgeable estate planner will use your trust as the centerpiece of your estate plan and make sure to coordinate and align the beneficiaries on your assets so that your intent will be realized once you have passed away."
Five, domestic disputes are less likely to break out
The estate administration process can be sped up and family disputes over inheritance can be avoided if a beneficiary is named and the deceased's affairs are kept in order.
If you have designated beneficiaries, your loved ones won't have to guess after your death who should receive what from your estate. Additionally, multiple beneficiaries can be named, and a specific share of the estate can be left to each. Having predetermined percentages helps to further guarantee that money is distributed as you intend.
Overall, this is the conclusion:
Taking the simple but crucial step of designating a beneficiary for your accounts can alleviate stress and expense for loved ones left behind. It is important to name beneficiaries so that your assets are distributed in accordance with your wishes and the probate process is streamlined.
To ensure that no one is forgotten, when naming beneficiaries, it is important to take into account all types of accounts. Beneficiary designations should be updated on a regular basis to reflect any changes in your life or your loved ones'.
-Older versions of this article included input from staff writer James Royal.
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