Make Beneficiary Designations Carefully

You can name your spouse, children and grandchildren as beneficiaries to receive certain assets after your death, including individual retirement accounts (IRAs), life insurance policies, and annuities. Make those designations carefully, since they typically override any provisions in your will. Consider the following points:

  • List all assets with beneficiaries, noting the owner, primary beneficiary and contingent beneficiary. Also indicate the expected value of each asset.
  • Select the most appropriate person as beneficiary for each asset. In some cases, tax and estate planning considerations may help dictate whom to choose. For instance, spouses typically have more options when inheriting an IRA, so that may be the better choice for your IRA.
  • Name contingent beneficiaries. Without a named contingent beneficiary, the asset will be included in your probate estate if your primary beneficiary dies before you. Then, the asset may have to go through the probate process and may be distributed to a beneficiary you had not intended to receive that asset.
  • When naming more than one beneficiary, indicate what percentage of the asset each beneficiary should receive. Also decide whether each beneficiary’s share should be distributed to that person’s heirs or divided among the remaining beneficiaries if a beneficiary dies before you.
  • Assess whether your beneficiaries are capable of managing the asset. If not, you may want to set up a trust to control distribution of the asset.
  • Review your beneficiaries periodically to determine whether changes are necessary. A divorce, remarriage, spouse’s death, or child’s birth are all events that may require changes to beneficiaries. You should also review your beneficiary choices if you make changes to your will.

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