Adding beneficiaries to your financial accounts, such as bank accounts, retirement accounts, and life insurance policies, is an important step in estate planning. Doing so also serves as a powerful means to prevent potential confusion in the aftermath of your passing by helping streamline the probate process and guaranteeing that your assets are distributed precisely in accordance with your intentions.
Here are six ways to add beneficiaries to your accounts:
1) On Your Bank and/or Credit Union Accounts
This may include checking, savings, money markets, and/or CDs. At the bank or credit union you can add a POD (pay on death) or TOD (transfer on death) designation to any of your accounts. This is free of cost, simple to do with a bank representative. Note: If you have a living revocable trust and your banking accounts are titled in your trust’s name, you have already completed this step and eliminated probate.
2) On Your Investment Accounts
The process of adding beneficiaries to your investment accounts is similar the above process with banking accounts. Start by contacting your financial advisor for assistance in adding a TOD (transfer on death) designation to your accounts. This is also free of cost and your financial advisor will provide guidance tailored to your situation.
3) On Your Retirement Accounts
The process for adding a beneficiary to your retirement accounts will vary slightly depending on the specific rules and procedures of your employer-sponsored plan. Contact the plan administrator of your IRA, 401(k), 403(b), 457 plan, pension, or other supplemental retirement account for specific guidance on adding a beneficiary to your retirement account. Some plans may also require the signature of a witness or a notary public.
4) On Your Annuities
Similar to retirement accounts, the process of adding a beneficiary will vary slightly depending on the specific type of annuity you have and the insurance company that issued it. Ask the insurance company for the beneficiary change form or request it through their customer service. They may provide a physical form to fill out or allow you to submit changes online, depending on their procedures.
5) On Your Life Insurance Policies
Adding a beneficiary to your life insurance policy is a crucial step in ensuring that your policy's death benefit is paid to the intended recipient(s) in the event of your passing. Reach out to your life insurance company or agent to initiate the beneficiary change process. You can typically find their contact information on your policy documents, statements, or their website. Ask the insurance company for the beneficiary change form. They may provide a physical form or allow you to complete the process online through their customer portal. Some policies also offer additional features like the ability to name contingent beneficiaries or to specify "per stirpes" designations, which distribute the benefit among the descendants of a beneficiary who predeceases you.
6) On Your Real Estate Deed
A TOD (transfer on death) Deed may be used to apply beneficiary designations to those important assets. Like the other beneficiary designations noted above, this is an easy and efficient method to ensure these assets avoid the costs and delays of probate, by passing those assets directly to your named heirs.
Do a Periodic Review
Once you’ve added beneficiaries to your accounts, it’s important to periodically review and update your beneficiary designations, especially after major life events such as marriage, divorce, the birth of children, or the death of a beneficiary. Failure to update beneficiaries can lead to unintended consequences and may not align with your current wishes.
Consulting with an estate planning attorney or financial advisor can help you ensure that your beneficiary designations are in line with your overall estate planning goals.