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Why You Need to Add Beneficiaries to Your Accounts

Chris Gottschalk

Chris Gottschalk About The Author

Dec 13, 2018 8:37:00 AM

The one part of financial planning nobody likes to think about is who will manage your accounts after you’ve passed away. This is understandable. Nobody really likes thinking about what happens after they’ve died, and trying to divide up even a small estate can seem intimidating.

The truth is estate planning isn’t difficult. A good lawyer can help you set up a will or a trust with a minimum of hassle, and thinking about your assets and heirs should give you an idea about what you should leave and to whom. However, one aspect of estate planning that often gets overlooked is designating beneficiaries for your financial accounts. This is a shame, since selecting a beneficiary is an easy step, and it’s one that can really save your heirs a lot of frustration.

A beneficiary is simply someone you choose to take ownership of one of your financial accounts after you’ve died. Upon taking ownership of your account, the beneficiary can then distribute the funds to people as specified in your will. This bypasses the probate process and saves everyone involved the financial and emotional headaches of going through the court system.

How to Add a Beneficiary to an Account

At most banks and credit unions, designating a beneficiary is easy. In fact, some institutions will even ask if you want to designate a beneficiary while you’re setting up an account.

If you didn’t get asked to designate a beneficiary while setting up your account (or you set up your account before you started planning your estate), you’ll want to call your financial institution and ask how to designate a beneficiary. Most of the time, you’ll just need to stop by your financial institution with the beneficiary’s name, address and social security number, but it’s always best to find out in advance. Some places may let you designate a beneficiary online, while others might want the actual beneficiary to show up—and some banks may not let you designate a beneficiary at all. In the last case, you may want to consider transferring your account to a financial institution that allows you to have a beneficiary.


Read More: The Basics of Estate Planning

Who Makes a Good Beneficiary?  

 Almost anyone can be a beneficiary. That said, some people make better beneficiaries than others.

Naming a minor as a beneficiary may be tricky. If you do, a court may require a guardianship to be established to manage money for the minor. You’ll also want to avoid naming a special needs person as a beneficiary, since the money they receive upon taking ownership might disqualify them from receiving any government assistance.

Ideally, you should select a beneficiary who is responsible, trustworthy and good at managing money. You can probably think of someone like this in your circle of family and friends.

Senior couple meeting financial adviser for investment

Read More: How to Plan for Retirement at Any Age

Changing Beneficiaries

What if your circumstances change, though? For instance, if you listed your spouse as a beneficiary, you probably won’t want them to be the beneficiary if you get divorced. Fortunately, changing beneficiaries is very similar to adding them.

The trickiest part about changing beneficiaries is remembering to change them. As a rule, you’ll want to review the beneficiaries of all your accounts every two years at a minimum. You’ll also want to review your beneficiaries after a major life event, such as a marriage, a divorce, a birth or a death. You’ll also want to make sure the information about the beneficiaries in your will matches the information in your account. Failing to do so can give your heirs a major headache.

Once you have beneficiaries added to your account, you’ll be able to sleep a lot better at night—and so will your loved ones. If you have an account at First Alliance Credit Union, contact us and a Member Advisor will be happy to help you designate a beneficiary.

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