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Adding a beneficiary to your financial accounts is essential because it allows you to control who your money will go to after your death. This person(s) will then have the authority to use the money in any way they wish.
What is a beneficiary?
A beneficiary is a person who receives money from a trust, will, or life insurance policy after a person has passed.
Why should you have a beneficiary?
Adding at least one beneficiary to your financial accounts is essential because it allows you to control who your money will go to after your death. The contingent beneficiary or beneficiaries will then have the authority to use the money in any way they wish. Common uses of those funds are used towards funeral expenses, debt payments, and general living expenses, especially if the person who passed away was the family breadwinner.
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Why should you keep your beneficiaries up to date on all your financial accounts?
Account-holders should keep their beneficiaries up to date on their accounts because when something happens to the account-holder, the person(s) or entity listed will receive the proceeds. For example, if you are married and have children, you may list all as beneficiaries on your financial accounts. Which loved ones you choose will receive your assets once you pass away.
Along with having beneficiaries on your bank accounts (checking and savings), you should have them on all your financial accounts. These include investment accounts like mutual funds, individual retirement accounts (IRAs), annuities, other retirement plans, and insurance policies. Additionally, you could help your family save time and money by avoiding probate court, which can be a long and strenuous process that could cause more grief.
To ensure your accounts are all up to date, call your financial institution or life insurance company to review and update your account as needed. A rule of thumb is to update your accounts at the beginning of every new year.
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Who can serve as your beneficiaries?
Fortunately, any person(s) or organization(s) can become your beneficiaries, including the following: your spouse, children, dependents, family members, friends, and charities. The best part is that you can have more than one listed.
You can have multiple beneficiaries, but list them as primary beneficiary and secondary. Thus, upon your death, the primary or contingent beneficiary will receive the death benefit(s). However, if the primary person or entity is not able to receive your assets, a secondary beneficiary may be able to receive them instead. In addition, you can choose how much money each person or organization can receive if you decide to have multiple on your financial accounts.
Why will having beneficiaries give you peace of mind?
Death can be a scary topic for many to discuss, especially when thinking about your own. Although we can’t control when it’s our time to die, it is crucial to plan to prevent your family from enduring extreme financial strain while grieving.
Having beneficiaries will give you peace of mind because you can decide who you wish to receive your funds from your financial accounts and how much of it. When someone does not have recipients lined up for when they pass away, this usually leads to funds going unclaimed.
Unclaimed funds are when the beneficiaries or lack thereof do not claim to receive the funds of a deceased person. If this claim is not made within the dormancy period, usually five years, the assets are transferred to the state. By having inheritors listed, you control who will receive your assets and do not have to worry about them ending up in the wrong hands.