A beneficiary legally receives your financial benefits after you die, typically as part of an inheritance. For some accounts, you must designate a beneficiary when you open them; here are a few.
Situations that need beneficiaries
If you have completed any type of estate planning, you may already realize that you need beneficiaries for a will. However, you can choose beneficiaries for multiple types of financial accounts, including the following:
- Checking and savings accounts
- Life insurance
- Brokerage accounts
Reasons to add beneficiaries
Naming a beneficiary allows you to determine who receives your assets after you die. For many people, this provides enough reasons for choosing a beneficiary.
These additional reasons also provide insight into why you should add beneficiaries to your accounts:
- Simplifies and reduces probate court procedures
- May prevent family disagreements
- Reflects major changes in your life, such as the addition of a child
- Reduces the stress for your loved ones
- Increases your control over your assets
Eligibility for beneficiaries
While wills and probate courts typically permit you to designate anyone as your beneficiary, other accounts may enforce stricter rules. During your estate planning, you should make sure that all of your accounts have beneficiaries that comply with the account’s policy to make sure your heirs receive your assets in a timely manner.
Consequences of failing to name a beneficiary
If you do not name someone as a beneficiary to your account, confusion about the proper heir may occur. This will delay the payment or transference of the funds and may extend the time spent in probate court.
The process of establishing beneficiaries to your accounts complements the rest of your estate planning. Although it may sound complex, it will spare your loved ones confusion and time spent sorting out your assets.