Should I Add Beneficiaries to My Investments?

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Take the time to add beneficiaries to your investment accounts.

You have several investment accounts.

Some of these accounts may be earmarked for retirement.

Others may be used to reach financial goals like purchasing a home or car.

When you die, money may remain in these accounts.

According to a recent The Street article titled “Why You Should Add Beneficiaries to Your Investment Accounts Now,” naming beneficiaries on these accounts directs who receives the remaining money.

Why is this important?

Add beneficiaries to your investment accounts.
Add beneficiaries to investment accounts to streamline your asset disbursement.

It keeps money in your estate.

When you do not add beneficiaries to your investment accounts, the assets are includes in your estate and pass through probate.

The probate proceedings often involve court proceedings and can take a year or longer to settle.

Instead of receiving the assets from the accounts directly as they would through beneficiaries designations, your heirs will have to wait to receive their inheritance.

Probate is also more costly with attorney fees and court fees.

In fact, probate can cost between 0.5 percent to 5 percent of your estate, depending on where you live.

Kansas would be on the lower end of the probate cost scale, with Missouri probate statutes tipping the fee scale much higher.

It alleviates stress on loved ones.

When you die, your loved ones grieve.

The probate process is more involved than simply inheriting through a beneficiary designation.

When you add a beneficiary designation, your beneficiaries typically need only provide a death certificate to receive the funds.

In many instances, the executor will procure the death certificate.

The simplicity of the process alleviates stress during a difficult emotional time.

It overrides your last will and testament.

If you have taken the time to add beneficiaries to your investment accounts, you should keep them updated.

Why?

Your beneficiary designations take precedence over stipulations made in your last will and testament.

If you update your last will to disinherit your former spouse but do not update your beneficiary designations, your ex will receive your investment accounts.

It streamlines the inheritance process.

Adding or updating beneficiaries is relatively simple.

How do you do this?

You begin by listing your accounts.

Next, contact the institution where the accounts are held to learn who is named as the beneficiary.

If there is no name, inquire how to add a beneficiary and follow the instructions.

It is wise to select a secondary beneficiary as well.

It gives special rules for retirement account beneficiaries.

Under law, spouses are the required primary beneficiaries for ERISA retirement plans.

If you choose a child or grandchild instead, your spouse will need to sign off with an approved waiver form provided by the institution.

Some states will entitle a spouse to half of all IRA assets even if another beneficiary has been listed as a beneficiary, unless written consent by the spouse is provided.

If you do not yet have any beneficiaries listed on your investment accounts, consider adding beneficiaries to make your estate plan efficient and effective.

Remember: this is a general discussion of a very complex legal and financial decision.

Make no moves without first consulting appropriate legal and financial professionals regarding the appropriate planning for your unique circumstances.

Reference: The Street (June 12, 2020) “Why You Should Add Beneficiaries to Your Investment Accounts Now”

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