Adding Beneficiaries To Your Accounts: Things To Consider

What we’ll cover:

• A beneficiary is someone you designate to receive your assets from accounts including retirement and other investment vehicles
• Almost any individual or entity can be a beneficiary
• There are many reasons to add beneficiaries to your financial accounts, not only for convenience but to ensure your wishes are met

When it comes to your financial to-do list, thinking about or choosing beneficiaries for your retirement and other investment accounts might land low on the list. Maybe super low. And we get it, compared to other money tasks, like researching stocks to invest in or saving up for a dream home, choosing or adding beneficiaries may not be the most exciting thing to do. Deciding who will get your assets might mean well, you’ll have to think about dying or leaving your loved ones behind. And those are not exactly the most uplifting thoughts. 

On top of that, adding a beneficiary might be one of those things that you tell yourself “I know it’s important, but I’ll do it tomorrow.” And if you’ve procrastinated, you’re definitely not alone. In fact, more than a third of respondents to an Ayco financial wellness assessment indicated that they haven’t updated their beneficiary designations. 

While we can agree that the topic of beneficiaries may not be a page-turner, the truth is adding a beneficiary doesn’t have to be a dreaded process. It can usually be done very quickly: we’re talking minutes in some cases. And more importantly, designating beneficiaries means that you have control over how your hard-earned assets are divvied up. 

So…what is a beneficiary, then?

You might have come across the term beneficiary if you opened an investment account. (You also might have skimmed over that info pretty quickly and not thought about it again). So just as a refresher: in the financial world, a beneficiary is an individual or entity who is eligible to receive distributions from a trust, will, life insurance policy, or other financial account (such as a retirement account).

To put it in laymen’s terms, a beneficiary is someone who you designate to receive particular assets (money, house, retirement accounts, etc.). Beneficiaries can be named in wills and trusts, but for this article, we’re just going to focus on adding them to certain financial accounts. 

Now you might be wondering, who exactly can be my 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 all of those. As the benefactor, you also may be able to put conditions on when and how the beneficiary receives certain funds.

Why should I add beneficiaries to my accounts? 

The short answer is, adding beneficiaries makes everyone’s life a whole lot easier. When you leave this world, your family clearly knows how your funds and assets should be divvied up. (You can probably think of a few different movies filled with family members arguing over who gets what after a death because there’s no will or the will is being contested.) Yeah, it’s good to avoid that. 

Not designating a beneficiary doesn’t guarantee your loved ones will be left out in the cold. But it may be more difficult for them to get access to your assets, so ensuring they have one less thing to worry about seems like a good deal.

For other types of investment accounts (i.e. non-retirement accounts), you’ll need to request a “transfer on death” form and fill it out with the beneficiaries you’d like to add. “Transfer on death” forms are also how you can add beneficiaries to certain bank accounts. The exact procedures for your accounts will depend largely on who your accounts are through, but generally, are a straight-forward process. 

It’s also a good idea to review your beneficiaries after a major life event, such as marriage, divorce, birth of a child, etc. Really any time that your existing beneficiaries might need to be changed or added to, or if you haven’t yet added beneficiaries, is a good opportunity to review your accounts.

We know that, again, this might seem like something you can put off or get to later. But we want to reiterate here that it’s not that difficult to add a beneficiary to your account! And especially when we’re talking about something as serious as what you want to happen with your assets after your death, there’s really no reason to wait. 

If you’ve added beneficiaries, your account providers can help ease some stress

Adding beneficiaries to your accounts usually means that, upon being notified of your death or the time for the benefit to be dispersed has come, the account providers typically reach out to your beneficiaries directly.

This can be helpful since the last thing your loved ones will likely want to do in an already stressful time is try to track down all of your various accounts and figure out what they need to do to get the funds. 

To gain access to your accounts, your beneficiaries will still usually have to do some paperwork and provide documentation, including your death certificate. But that’s still typically an easier process for them than if you hadn’t added beneficiaries at all.