Direct Your Money – Beneficiary Designation
You know that having a Last Will & Testament is incredibly important. It is. A Will allows you to specify who gets your assets and stuff when you die. But did you know much of your financial wealth most likely won’t be determined by your Will? And that that is a good thing? Most financial accounts like retirement (401Ks, TSP, 403B, IRAs), investment, bank, and insurance allow or require you to name beneficiaries. This beneficiary designation takes precedence over what is in your Will.
Why Does This Matter?
Beneficiary designation is important because the transfer of assets happens much faster than having it go through probate. Probate is the general process of authenticating your will and administration of your estate. Probate can take months even for simple estates and sometimes years for complicated estates. Transferring assets and accounts directly to beneficiaries is also cheaper than having the assets go through the probate process.
Beneficiary Designation Updates
Most people accumulate numerous financial accounts throughout their lives. You may still have the bank account you opened when you first started working or a retirement account with an employer you joined right after college. Has your life changed since then? Are you now married or divorced or do you now have children? If you haven’t reviewed them recently, I bet you’ll be surprised by the beneficiaries designated on your older accounts.
I did this just a few years ago and I found an old account that still had my parents as beneficiaries because when I opened it, I wasn’t married. This is why the military tries to ensure you update your Record of Emergency Data and Servicemembers’ Group Life Insurance on a regular basis. We all heard the horror stories of Next of Kin notifications that go to a former spouse or to a wrong address because the member didn’t update their information.
If you haven’t reviewed all of your designations recently, take some time to do it. You should do this every few years. You should also do it after a major life change like marriage, the birth of a child, the death of a beneficiary, or divorce.
Hopefully, I’ve persuaded you to review your beneficiary designations across any accounts that allow you to name them. While not an exciting endeavor, it’s important. You’re doing something that will help your family during a difficult time. They’re trying to cope with your loss. Don’t contribute to the stress by introducing challenges regarding your assets that are meant to take care of them.