When thinking about your financial goals, it's easy to get caught up in big dreams—a new home, an exciting vacation, or even a comfortable retirement. However, another crucial aspect to consider is naming beneficiaries for your accounts. If you pass unexpectedly, this simple step can spare your loved ones from legal hassles and heartache.
A beneficiary is the person or entity receiving your assets when you pass away. This can be anyone: a family member, a trust, a charity, or a friend. Unlike heirs, who inherit based on legal entitlements, you specifically name beneficiaries. For example, the beneficiary of a life insurance policy receives the death benefit without lengthy court processes.
According to CNBC, it’s essential to name beneficiaries for life insurance policies, retirement funds, bank accounts, and other assets. Without beneficiaries, your estate might spend months or years in probate. While the courts decide how to divide your assets, your loved ones will go without the financial support you left them.
You can name almost anyone as a beneficiary. Here are some common choices:
Some states have rules requiring certain beneficiaries, such as a spouse. Researching your state’s laws during estate planning is important so your beneficiary choices align with legal requirements.
Choosing a beneficiary is a significant decision that shouldn't be rushed. Here are some factors to consider:
Designating a beneficiary is usually straightforward. First, gather the necessary information, including the beneficiary's full legal name, relationship, and possibly Social Security number.
Next, contact the institutions that hold your accounts. Each provider will have its own process for naming beneficiaries. You can do this online or through a written request rather than in person.
Your life circumstances change, and so should your beneficiary designations. It's important to update your beneficiaries when a major life event occurs. Changing your marital status, job status, or having a child are all good reasons to reevaluate your beneficiaries.
If you don’t name a beneficiary, your assets could be tied up in probate. This means your loved ones might have to wait months or even years to access the funds you intended for them. In the case of life insurance, if no beneficiary is named, the payout will go to your estate and be distributed according to state law, which might not align with your wishes.
Naming a beneficiary is a must to spare your loved ones undue stress and carry out your wishes. Contact our law firm today for help naming beneficiaries and creating an estate plan matching your needs.