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Beneficiary Designations

Certain assets such as Life Insurance, pensions, 401ks and IRAs allow the naming of a beneficiary to transfer assets after death.

Naming a beneficiary bypasses the probate process, allowing the beneficiary to receive the assets without court involvement.

Upon your death, the beneficiary provides a death certificate and other information (usually a form) required by the financial institution and receives the assets.

Important things to know about beneficiary designations:

  • Beneficiaries should be named on all accounts that allow one or assets in that account may require some type of probate proceeding to distribute the assets in that account.
  • Beneficiary designations override anything designated in a will or trust.
    • For example, if you name one child as beneficiary on your account, but name all your children equally in your will, the child named as beneficiary will receive all the assets in the account and will have no legal obligation to share those assets with his or her siblings.
  • Minors should never be named as beneficiaries.
  • Beneficiary designations must be carefully written to ensure your wishes are clear.

Most forms from financial institutions indicate primary, secondary and possible tertiary beneficiaries and require you to include what percentage of the asset each beneficiary should receive. A primary beneficiary receives the estate before a secondary, and a secondary beneficiary receives the estate before a tertiary beneficiary.

Another type of beneficiary designation is the TOD or POD (transfer on death or payable on death) account. Most financial institutions provide this option for their products, including checking, savings and brokerage accounts. Again, the designation overrides anything designated in a will or trust.

If you are interested in learning more about beneficiary designations and how they fit into a comprehensive estate plan, contact me online for a free initial consultation and I will be happy to answer your questions.