PLANNING TODAY

What You Need to Know About Beneficiary Designations

When you name your beneficiaries on a life insurance policy, an annuity contract, or a retirement plan, you are making a beneficiary designation. This is a simple way to pass assets to your heirs. However, you need to understand how beneficiary designations work, so that you can achieve the results you want. Here are some important points to keep in mind:

  1. These assets are not controlled by your Will — The death benefits from life insurance, annuities and retirement plans will pass directly to the beneficiaries named on the contract. They are not included in the probate process. The funds will be distributed directly to your beneficiaries, once a claim is filed. While this is good for your beneficiaries, it also means that you must keep your beneficiary designations up to date.
  2. Only you can change your beneficiary designations — Once you have passed away, the company holding your assets will distribute them exactly as you have specified. You may change your beneficiary designations at any time up until your death, but they cannot be changed afterwards. If your life insurance policy still names your former spouse as your beneficiary, that is who will receive your money, even if you wanted it to go to someone else.
  3. Review your beneficiary designations regularly — It is easy to forget who you named as beneficiaries. To avoid making inadvertent but costly mistakes, make sure you review all of your primary and secondary beneficiary designations regularly, especially after the death of a spouse. You could unknowingly cause great harm to your family’s financial situation by not updating your beneficiary designations.
  4. It is easy to update your beneficiaries — Insurance and financial services companies have made it very easy to update your beneficiaries. You simply phone the customer service department, or your agent, and request a “Change of Beneficiary Form.” Fill out the form, mail it back in, and your new beneficiary designations will replace your old ones. The process takes only a few days and costs you only a postage stamp. This is a small price to pay for making sure your benefits will go where you want!
  5. Your estate is your ultimate beneficiary — If you name no beneficiaries, or, if your beneficiaries are no longer alive, your assets may be included in your probate estate and distributed by your Will. This can delay their distribution to your heirs. You can avoid this by keeping your beneficiary designations current.
  6. Name primary and contingent beneficiaries — When you designate your beneficiaries, you can name primary beneficiaries and contingent (or secondary) beneficiaries. Your contingent beneficiaries receive the benefits if the primary beneficiaries are no longer alive. This is an important tool, since one or more of your primary beneficiaries may die before you have a chance to update your beneficiary designations.
  7. Get professional advice — Planning your beneficiary designations can be complicated. It is often a good idea to ask your attorney for guidance. This is especially true if you wish to leave assets to a minor child, which will often require the creation of a trust. Your attorney can also prepare a customized beneficiary designation letter when your beneficiary plans are complex or do not fit on the Change of Beneficiary Form.
  8. Leave a portion for charity — You may also name our organization as a primary or contingent beneficiary. This is an excellent way to leave a legacy and ensure that your support will continue, even after you are no longer here. Make sure you call us for our exact legal name, so you can enter it properly on the form. Please call us for assistance when making this type of arrangement.

We hope you have found this issue of Planning Today useful and interesting. If you have any questions, please contact your professional advisor, or give us a call. Thank you for your continued support.

Steve Brownstein, Director of Development
Menorah Manor Foundation
255 59th Street North
St. Petersburg, FL 33710
Telephone: 727-302-3705
Fax: 727-345-3957
Email: foundation@menorahmanor.org

 

Make a Donation!

Reserve a space at Inn on the Pond