New Year’s Resolution for 2019: A 3-Step Review of your Account Beneficiaries

Gerald A. Townsend |
Categories
Estate Planning
Gerald's Articles

The dawn of a new year is the ideal time to review your various financial accounts and make sure that your beneficiaries are updated. Changes may have occurred during the previous year such as marriage, divorce or the birth of children which could impact who you would like to name as beneficiaries.


Why is it important to keep your beneficiaries updated? Beneficiaries of your accounts receive funds before the distribution of any assets named in your will. In other words, beneficiary designations on your account override your will.


Primary beneficiaries are the first in line to inherit the funds in your account. You can have as many primary beneficiaries as you wish, provided the total number of shares equals 100%.


Contingent beneficiaries inherit the funds only if the primary beneficiaries are deceased. Once again, you can have multiple contingent beneficiaries as long as the total number of shares is 100%.


Step 1:  Check to see if the beneficiaries named on your accounts are still valid.

  • Have any of their names changed?
  • Are any of them deceased?
  • Do you only have primary beneficiaries named? If so, you may want to consider adding contingent beneficiaries.

Step 2: Consider what happens if a beneficiary predeceases you.


If any of your beneficiaries were to predecease you, and they have children, those children would not receive any assets from the account unless you have stipulated so in your beneficiary designations. Provisions allowing the children of deceased beneficiaries to receive their share of your inheritance can be put into place by updating beneficiary forms for your accounts.


Step 3: Look beyond your IRAs and 401(k) accounts to individual and joint tenant accounts.

  • Individual Account - When opening an IRA or 401(k), there is a section of the application for naming beneficiaries. This is not always the case when an individual account is opened, but beneficiaries can be added to an individual account by completing an additional form.
  • Joint Tenant - By definition, with a joint tenant account (with rights of survivorship), the surviving account holder inherits the assets. However, it is wise to name primary (and contingent) beneficiaries in the event both account holders are deceased. Again, an additional form is needed to accomplish this.

So, take a moment to review your account beneficiaries. If you need help finding out what beneficiaries are listed on your accounts, or wish to make any changes, please contact Bonnie@AssetMgr.com or call (919) 782-9689.

Gerald A. Townsend, CPA/PFS/ABV, CFP®, CFA®, CMT is president of Townsend Asset Management Corp., a registered investment advisory firm located in Raleigh, North Carolina.  Email:   Gerald@AssetMgr.com