Selecting Beneficiaries for Life Insurance & Retirement Accounts
Many assets, including individual retirement accounts (IRAs), life insurance policies, and annuities, can have
beneficiaries designated to receive the asset after your death. Make these selections carefully, since they typically override any provisions in your will. Consider the following points:
- Select the most appropriate
person as beneficiary for each asset. First, list all assets
with beneficiaries, noting the owner, primary beneficiary, and
contingent beneficiary. Then determine whether you have selected
the appropriate person as beneficiary for each asset. In some
cases, tax and estate planning considerations may help dictate
whom to select. For instance, spouses typically have more options
when inheriting an IRA, so that may be the better choice for
- Name contingent beneficiaries. Without a named contingent beneficiary, the asset
will be included in your probate estate if your primary beneficiary
dies before you. Then, the asset may have to go through the probate
process and may be distributed to someone you had not intended
to receive the asset.
- Indicate what percentage
of the asset each beneficiary should receive. Also,
in the event a beneficiary dies before you, decide whether each
beneficiary's share should be distributed to that person's heirs
or divided among the remaining beneficiaries.
- Assess whether beneficiaries
are capable of managing the asset. If not, you may want
to set up a trust to control the asset's distribution.
- Periodically review
your beneficiaries to see if changes are warranted. A divorce,
remarriage, spouse's death, or child's birth are all events that
may require changes to beneficiaries. You should also review
your beneficiary choices if you make changes to your will.