It is essential to name a beneficiary on certain accounts and policies.

Most people desire financial security and success.

They want to have enough money to keep a roof over their heads without fear of losing it, feed their families, and have a comfortable retirement.

While these are good goals, they do not wholly encompass financial security.

Protecting your assets for your loved ones includes estate planning and beneficial designations.

Many accounts and insurance policies are inherited through beneficiary listings.

Neglecting these can lead to trouble for your loved ones if you were to die.

When you name a beneficiary for a life insurance policy or other account, it is wise to name a trust rather than directly choosing a minor child.

What Is a Beneficiary?

The person or entity who inherits an asset after your death is known as a beneficiary.

You can name a family member, friend, charity, or trust to receive your asset.

While heirs are appointed with a last will and testament or decided through legal entitlements, beneficiaries are specifically named on the asset agreements.

When a beneficiary is designated on a life insurance policy or payable-on-death account, the funds will be available immediately to the beneficiary without waiting for probate court proceedings.

Should You Name a Beneficiary?

According to a CNBC article titled "Naming a beneficiary can save your loved ones a lot of heartache — here's how to do it," naming beneficiaries for certain assets is essential.

What assets should have beneficiary designations?

Retirement funds and life insurance policies should include named beneficiaries.

Bank accounts and other assets may also make this an option.

One key advantage for those who name a beneficiary on their accounts or policies is that these assets will not be subject to probate.

As a result, your loved ones will have financial support available while the rest of your estate is being settled in probate.

Who Can Be a Beneficiary?

Generally, anyone can be named as a beneficiary.

Common categories include individuals, charities, and trusts.

Individuals can be family members, friends, or other loved ones.

Charities involve non-profit organizations or churches you support.

Trusts are legal entities created to manage your assets for specific purposes.

Some states have regulations governing who can be selected as beneficiaries of certain assets.

In many cases, this provision specifies spouses.

You can research your state laws or work with an experienced estate planning attorney before you name a beneficiary in case there are restrictions.

What to Consider Before You Name a Beneficiary

Careful thought should be given to selecting beneficiaries.

You should consider your relationship with the beneficiary.

Do you have a spouse or dependant who will require financial support after you are gone?

You should think about whether your possible beneficiaries are financially stable.

Tax implications are also important.

Some beneficiaries could have greater tax burdens when inheriting as a beneficiary.

Lastly, age and capability should be considered.

If you have minor children or an adult relative with disabilities, setting up a trust as the beneficiary could be a better option to provide for these individuals.

How to Designate a Beneficiary

The process is typically straightforward.

You will need your beneficiary's full legal name, relationship status, and Social Security number.

Once you have this information, you can contact the institution to request the documentation needed to add or update beneficiaries.

Some institutions allow you to name a beneficiary online or through written request.

When Should You Update Your Beneficiaries?

Because life situations constantly change, you may need to change your beneficiary designation at some time.

You should review and update after getting married, having children, or even changing your job.

What Happens If You Do not Name a Beneficiary?

Failing to name a beneficiary means your asset will be subject to probate.

Yikes!

As a result, your loved ones could be required to wait months or years to access the funds you intended for them to have.

For life insurance policies, the payout would be made to your estate and distributed according to the laws of the state or the terms of your last will and testament.

Name Your Beneficiary Today

If you have not yet named a beneficiary, there is no time like the present to do so.

Taking action now and creating a comprehensive estate plan can help you protect everyone you love and everything you have.

What are Key Takeaways for Designating a Beneficiary?

When you name a beneficiary on your account, you ensure that your asset is distributed to the appropriate individual or entity without going through probate.

Although you can name trusts, charities, or individuals as your beneficiaries, you should regularly review and update your designations as needed.

This post is for informational purposes only and does not provide legal advice. You should contact an attorney for advice concerning any particular issue or problem. Nothing herein creates an attorney-client relationship between Harvest Law KC and the reader.

Reference: CNBC (Feb. 23, 2024) "Naming a beneficiary can save your loved ones a lot of heartache — here's how to do it"