The Importance of Beneficiaries

An important step in managing your money, is to assign a beneficiary or beneficiaries to your eligible financial accounts, such as your insurance policies, investment accounts (401K, Mutual Funds, HSA), and banking accounts. Assigning your beneficiaries give you full control of deciding who gets your assets (funds held in your financial accounts), should something happen to you.

When choosing your beneficiary, you have the freedom to choose a child, parent, spouse, grandchildren, friend, trust, or legal entity. You also have the power to assign the order in which funds can be distributed. The primary beneficiary or beneficiaries will be the first in line to receive your assets. If the financial organization is not able to locate any of your primary beneficiaries, and you had assigned secondary or contingent beneficiaries, then they would be next in line to receive your assets. You also have the choice to determine what percentage each person gets. You may decide to allocate your assets equally among your beneficiaries, or you may decide to give one beneficiary more than the other. Making these decisions eliminate the guess work about who gets what.

So what happens if you did not assign a beneficiary and something tragic happened to you? There are some institutions that will allow the State to assign and allocate funds to who they see fit, which may not match or agree to the decision you would personally make. In addition, there are some institutions that will not release funds for distribution if no beneficiary is named. This is why this is important for you to assign a beneficiary.

If you have not assigned a beneficiary as yet, it’s time for you to begin considering who you would like to give this role. In addition, if you have not reviewed your beneficiaries in a long time, now would be a good time to see if you need to make an update.

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