Q: What do I need to know about designating beneficiaries on my financial accounts?
A: To properly designate beneficiaries on financial accounts, consider the following:
· Use the official form provided by the financial institution,
· Name primary and secondary (contingent) beneficiaries,
· Use caution if listing minors (beneficiaries who are not adults) on an account, or if listing someone other than your spouse on a 401(k) or IRA,
· Check to update your designations following a major life event, and
· Be sure to ensure designations on your financial accounts do not conflict with designations in your estate documents.
Designating beneficiaries on financial accounts can be a good choice to pass assets at death, without the need to probate or create a trust. It is often appropriate to name a primary beneficiary and one or more secondary (contingent) beneficiaries. This is because a beneficiary may pre-decease you or an organization may no longer exist upon your passing.
Naming a minor requires caution since a minor cannot directly inherit funds in a financial account. Instead, a custodian or trustee is appointed to administer the funds until the minor reaches adulthood per state law or until some applicable event occurs.
Employee benefit plans, such as a 401(k), have special rules as well, like naming someone other than your spouse as a beneficiary. Individual Retirement Accounts (IRAs) have similar rules and notice requirements around not naming your spouse as beneficiary.
Remember to compare designations on your financial and retirement accounts with any designations made in your will or trust. You want to ensure that beneficiaries are properly designated, and accounts and documents do not conflict with one another. In general, a designation on a financial account will prevail over a designation in your estate document.
Finally, once you designate beneficiaries across financial accounts, please update those designations as needed. If you subsequently create estate documents or have a life-changing event such as marriage, divorce, birth or death of a family member, then review and update your designations as needed. Check with your financial advisor or estate attorney for what best suits you, as state law varies and there may be tax and estate considerations specific to you.
Your investment professional at Alpine Bank Wealth Management will work with you to ensure your beneficiary designations are correct and complete.
Jesse Bopp, J.D.
Vice President
Alpine Bank Wealth Management
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