In today’s age of the internet, the ability to access and edit information is the easiest it’s ever been! However, so many people are unaware of the impact updating beneficiaries can have on their financial plan, especially when doing so is often just a few clicks away.

What are Beneficiaries?

A beneficiary is a specific person(s) that can be listed on the account, by the account owner, who will inherit assets upon the passing of the owner. 

For example, let’s say I have an Individual Retirement Account (IRA) and would like the contents of my account to go to my brother. I can list my brother as my beneficiary, and if something were to happen to me, he would inherit that account.

Primary Beneficiary – The person first in line to inherit your assets, designated by you. You can list more than one primary beneficiary, in the event you’d like to split assets across multiple parties. 

Contingent (Secondary) Beneficiary – The person who you would like your assets to go to, if your primary beneficiary predeceases you. 

Much of financial planning revolves around being able to provide for our loved ones, but we don’t often think about what will happen to our assets when we die. Assigning beneficiaries is a good way of ensuring that certain assets are delegated to specific individuals in the event of your passing. 

Should I also write a Will?

Having a written Will is a very important part of estate planning. A Will allows you to dictate which assets will be inherited and by whom; further, it also allows you to designate who will be making important decisions regarding your estate.  You can designate who will manage the affairs of your estate, as well as who can & cannot take care of your surviving minor children. In some cases, the person you want to take care of your children may not be the same person you want to make financial decisions for them. It’s crucial to have well-thought-out and clear instructions. 

Beware! Your beneficiaries will supersede (override) your written will

People put serious time and thought into creating written estate planning documents. Such that in the event of their passing they’re able to have assets transferred in line with their wishes, and to protect the people in their life. However, if the beneficiaries designated on your account differ than the language of the Will, the asset will pass to the beneficiary that’s listed, and not in accordance with your Will.

To avoid this situation, simply ask your estate attorney how the beneficiaries should be listed on your accounts. After your will is written, your attorney should provide specific language or designations that you can then update at the financial institution where your various accounts are held. 

What happens if there is no will?

If you have assets in an account that are not jointly owned, and no beneficiaries are listed, your assets will go to probate upon your passing.  Probate, by definition, is the legal process in which the validity and authenticity of a will are determined. 

If there is no written or valid will at the time of your passing, you are considered to have died intestate and your assets will be distributed according to state law. 

If you pass without a will or listed beneficiaries, much of how your estate is distributed will be determined by what state you reside in and will depend on whether you were single or married at the time of your passing. The order will vary by state but typically goes based on who was most closely related to you. 

It’s important to take this distribution in order if you have a mixed family that may include stepchildren or foster children, as they may not legally inherit a portion of the assets if they were not legally adopted.

Disclosures:

The information provided is for educational and informational purposes only and does not constitute investment advice and it should not be relied on as such. It should not be considered a solicitation to buy or an offer to sell a security. It does not take into account any investor's particular investment objectives, strategies, tax status or investment horizon. You should consult your attorney or tax advisor.

The views expressed in this commentary are subject to change based on market and other conditions. These documents may contain certain statements that may be deemed forward‐looking statements. Please note that any such statements are not guarantees of any future performance and actual results or developments may differ materially from those projected. Any projections, market outlooks, or estimates are based upon certain assumptions and should not be construed as indicative of actual events that will occur.

All information has been obtained from sources believed to be reliable, but its accuracy is not guaranteed. There is no representation or warranty as to the current accuracy, reliability or completeness of, nor liability for, decisions based on such information and it should not be relied on as such.

Consilio Wealth Advisors, LLC (“CWA”) is a registered investment advisor. Advisory services are only offered to clients or prospective clients where CWA and its representatives are properly licensed or exempt from licensure.