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4 Reasons Why Beneficiaries Are Important

Nashville Blog 2018 August 4 Reasons Why Beneficiaries Are Important
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4 Reasons Why Beneficiaries Are Important

Posted By David Whittaker, Attorney at Law || 8-Aug-2018

Where you’re standing right now, you probably have a number of accounts with beneficiary designations. But, when was the last time you took a fresh look at those beneficiaries? If you hurriedly scribbled down your spouse or children decades ago, there’s a good chance they need some updating.

If it’s been more than five years since you updated your beneficiary designations (it might have even been decades), it’s important to review your beneficiary designations on all applicable accounts, such as:

  • Life insurance
  • Bank accounts
  • Brokerage accounts
  • Pensions
  • 401(k)s and IRAs
  • All other applicable assets

“Why should I put my life on hold to review my beneficiary designations?” Because, there’s a good chance that some of these beneficiary designations were established many years ago and your life circumstances may have changed so the old designations no longer apply to your present-day wishes.

My advice is to consider all of your beneficiary designations whenever a major life event takes place, whether it’s good or bad. Often, beneficiary designations change in times of celebration and tragedy. That said, here are four reasons why your beneficiary designations should be treated with the respect they deserve:

1. Beneficiary designations clarify who exactly gets how much.
A lot of people quickly scribble their spouse or children’s name without putting much thought into it because death seems far off. But in reality, beneficiary designations are very powerful and they let you determine who gets what. A simple name and signature placed by you can mean tens of thousands of dollars if not more to one of your loved ones.

2. They allow you to divide money however you please.
Contrary to popular belief, you don’t have to divide the money straight down the middle. You can divide the money however you want. For example, you can give 70 percent to your daughter because she stays in touch with you and 30 percent to your son because you never hear from him. So, if you prefer one beneficiary over the other, you can reward him or her with a larger slice of the pie.

3. Beneficiary designations supersede a will.
Beneficiary designations not only supersede your will, but they avoid probate. So, if you state in your will that your Aunt Pam will get the cash in your savings account, but the beneficiary designation on the account says your sister will get it, Aunt Pam will have to step aside for your sister.

4. They let you have a backup plan.
In the paperwork for beneficiary designations, there is a section called “contingent beneficiaries,” which is your backup plan, your Plan B. So, if your beneficiary passes away before you do, the contingent beneficiary will receive that person’s share.

Related: Importance of Updating Beneficiary Designations

My advice is to review your beneficiaries whenever there is a birth, divorce, death, or other major change in your circumstances. When you keep your beneficiaries updated, it saves your family a lot of trouble and paperwork later.

Categories: Beneficiary Designations, Change of Beneficiary

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David Whittaker, Attorney at Law - Nashville Probate Attorney
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