Broker Check

Reminder to Check Your Beneficiaries

January 15, 2019


As the new year begins, now is a great time to get your financial affairs in order. You know the drill - save more, spend less. It's also important that you review the beneficiaries listed on your investment accounts and/or insurance policies.

We've been in business a long time (28 years!) and have had clients that have been with us for decades. Some clients have become an extension of our family, and in some cases vice versa. It is heartbreaking when a client passes away, but we've learned that clients choose their advisor carefully, as they want their family/beneficiaries to have adequate guidance during their time of need.

While we're here to plan and guide clients and beneficiaries through life's difficult transitions, the responsibility to correctly name beneficiaries rests on the client. Consider the below important reminders:

  • Following the death of the account owner, the primary beneficiary is first in line to receive the account's assets, while the contingent beneficiary comes next in line if the primary beneficiary is no longer living. You can name multiple primary and contingent beneficiaries for each account.
  • Confirming and updating your primary and contingent beneficiaries or “Transfer-On-Death” (TOD) designations from time-to-time is important, especially when a major life event takes place. These events may involve the arrival of new children or grandchildren, a death in the family, or a divorce, amongst others.
  • The beneficiaries listed on your Qualified accounts, such as an IRA or 401k, should have a named beneficiary. These accounts are not typically governed by a will and instead transfer more seamlessly to the named account beneficiary (individual or entity). The same goes for TOD designations on certain Non-Qualified accounts.
  • Consider whether you’d like your beneficiaries to be listed as “per stirpes” or “per capita”.
    • Example: You have three adult children, each being named a 1/3 beneficiary on an IRA account. One of the beneficiaries passes away while the IRA owner is still living.
      • If the beneficiaries are designated “per stirpes”, on the death of the IRA owner the two remaining beneficiaries, along with the decedents of the deceased beneficiary, will receive their 1/3 share of the account funds.
      • If the beneficiaries are designated “per capita”, on the death of the IRA owner the account funds will be divided in two, with each of the living beneficiaries receiving 1/2 of the account funds. 

Here's the takeaway - confirming and updating your beneficiaries is important and can help make an unfortunate major life event less difficult on your family and/or beneficiaries. Set aside some time soon to review your accounts and make sure your beneficiaries are in order for when it really matters.