The Importance of Beneficiaries and Account Titling

What is a beneficiary?

Updating beneficiaries on various accounts is an important part of a good financial plan. What is a beneficiary? A beneficiary is a person or entity (charities, schools, etc.) that receives the assets within an account in the event of the owner’s death. Having up to date beneficiaries ensures that your assets are transferred to the desired heirs outside the slow, public, & expensive process of probate. Worse yet, if one doesn’t have named beneficiaries or a valid will, their assets will transfer via intestate succession, where the probate court essentially decides who is to receive the assets.

Which accounts should have beneficiaries named?

It’s advisable to name beneficiaries on your retirement accounts (Roth IRA, Traditional IRA, etc.), employer sponsored retirement plans (401k, 403b, etc.), Individual investment accounts, & life insurance policies. It is recommended these beneficiaries are reviewed & updated as major life events occur, such as, marriage, children, divorce, etc. Accounts such as retirement plans, life insurance, & IRAs pass directly to the desired parties through a beneficiary designation, however, individual investment accounts do not. In order to designate beneficiaries for an individual account, you must add a transfer on death (TOD) designation to the account title. Adding the TOD designation allows the account owner to make certain the assets will be transferred desired destination without having to pass through probate.

Who are your current beneficiaries?

Updating beneficiaries is often forgotten or procrastinated, yet is crucial to a seamless & easy transfer of assets upon death. If you haven’t updated your beneficiaries in a while, consider contacting your advisor to make sure they are exactly who you want them to be.

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The Importance of Beneficiaries and Account Titling

What is a beneficiary?

Which accounts should have beneficiaries named?

Who are your current beneficiaries?

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Eric Schierhorn

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