The Importance of Adding Beneficiaries to Your Accounts

What we’ll cover:

• Naming beneficiaries is an important step in ensuring you have a say in how certain financial accounts should be handled after your death.
• Generally speaking, any individual or entity can be named a beneficiary.
• It’s a good idea to review your beneficiary designations each year, so you can make updates if necessary.

While designating beneficiaries may not be the most exciting task on your financial to-do list, it’s not something you should put off indefinitely. Naming beneficiaries is an important step in ensuring you have a say in how your financial accounts and other assets should be handled after your death.

What is a beneficiary?

A beneficiary is an individual or entity who is eligible to receive distributions from a trust, will, life insurance policy, or certain types of financial accounts (e.g., 401(k) or savings account).

Put another way, a beneficiary is someone you designate to receive your assets after you pass away. The assets could include things like cash, bank accounts, a house, a car, etc.

Who can I name as a beneficiary?

Generally, any person or entity can be a beneficiary. You could leave your assets to your spouse, children, a favorite charity, or a combination of those. As the benefactor, you may also be able to put conditions on when and how the beneficiary receives certain assets.

Why should I add beneficiaries to my accounts?

Designating beneficiaries is a way for you to let others know how you want your financial accounts to be handled after your death. In other words, who should get what. This helps ensure your wishes are carried out without putting too much burden on your family. Without clear beneficiary designations in place, it may take more time for your loved ones to gain access to those accounts after your death.

Leaving behind clear instructions can also help minimize any confusion and potential conflict between family members who may try to lay competing claims to your assets.

A few tips to help you get started

For bank accounts, you can usually name a beneficiary by filling out a Payable on Death designation form. While you’re living, you remain the sole owner of the bank account, but the POD designation allows you to transfer the individual account to a beneficiary of your choice after death.

Typically, you’ll need to provide the following when adding a beneficiary (or beneficiaries):

• Name and date of birth of the beneficiary
• Social Security number of the beneficiary
• Address and contact information of the beneficiary

For most retirement accounts, like 401(k)s and IRAs, there’s usually a beneficiary form you can fill out and submit. If you’re having trouble locating the form, contact your account provider.

It should only take a few minutes to complete the form. Generally, you’ll have to provide some basic information like: the name of your beneficiary (or names in the case of multiple beneficiaries); their relationship to you; contact information; address; date of birth; and Social Security number.

For other types of investment accounts (e.g., non-retirement accounts like a brokerage account), you’ll typically need to request and complete a Transfer on Death form to designate your beneficiary.

Keep in mind that each financial institution or bank will have its own forms and policies when it comes to designating beneficiaries. If you have questions on how to request or submit a form, it’s best to contact them directly for more information.

Keep your beneficiary designations up to date

While adding beneficiaries can be pretty straightforward, everyone’s financial situation is different. If your needs are a little more complex, it’s a good idea to get in touch with a financial advisor or estate planner who can help guide you through the designation process and answer any questions you may have.

Once you’ve added your beneficiaries, don’t just forget about them. It’s a good idea to review your designations each year or after a major life event (marriage, divorce, birth of a child, etc.) to make sure they still reflect your wishes. You can then update them as necessary.