#WhyHaveBeneficiaries
Benefits of Assigning Beneficiaries to Bank Accounts
Having beneficiaries on your bank accounts can provide several benefits, such as:
- Avoiding Probate: When you pass away, the funds in your bank accounts will be transferred directly to your designated beneficiaries without having to go through the probate process.
- Privacy: Designating beneficiaries allows for a private transfer of assets, keeping your financial affairs confidential.
- Quick Access: Beneficiaries can access the funds in your accounts immediately after your passing, helping them cover any immediate expenses.
- Peace of Mind: Knowing that your loved ones will be taken care of financially can provide peace of mind for both you and your beneficiaries.
Potential Drawbacks of Assigning Beneficiaries
While there are many benefits to assigning beneficiaries to your bank accounts, there are also some potential drawbacks to consider:
- Limited Control: Once you assign a beneficiary, you may have limited control over how the funds are used after your passing.
- Legal Issues: If you have multiple beneficiaries or complex family dynamics, disputes could arise over who is entitled to the funds.
- Tax Implications: Depending on the amount of funds in your accounts and the tax laws in your area, there could be potential tax implications for your beneficiaries.
#ChoosingTheRightBeneficiary
Who Should You Choose as Your Beneficiary?
When selecting a beneficiary for your bank accounts, consider the following:
- Trust: Choose someone you trust to handle your finances responsibly.
- Communication: It’s important to communicate with your beneficiary about your wishes and ensure they understand their responsibilities.
- Updates: Regularly review and update your beneficiaries as needed, especially after significant life events like marriage, divorce, or the birth of children.
#FinalThoughts
Conclusion: Is it Worth Having Beneficiaries on All Your Bank Accounts?
Having beneficiaries on your bank accounts can provide peace of mind and financial security for your loved ones in the event of your passing. While there are potential drawbacks to consider, the benefits often outweigh the risks. Ultimately, the decision to assign beneficiaries to your accounts is a personal one, and it’s important to carefully consider your options and choose the right beneficiaries for your unique circumstances.
It just means it would avoid probate.
If you do happen to pass, it is one less thing your family will have to worry about at a time when they will be grieiving.
Retirement accounts should all have beneficiaries. Your regular savings and checking could be set up to be POD which means payable on death. Then the person you designated just had to go in with a death certificate and can get the money pretty quick. Otherwise it stays until probate is finished. I am setting up one account as POD so my parents can use that money for the funeral and costs associated with selling my house. Otherwise they would have to front all those costs and possibly wait a year or more to get the money back.
>am I better off assigning beneficiaries in each of my accounts right now?
Yes. All assets that *can* have an assigned beneficiary, *should*.
>Is there any downside to me doing this, and does it hurt me at all?Â
No downside. Just review your designations periodically, and make sure they are still assigned to the people you want as your beneficiary.
Downside: you have a lot of money and one of your beneficiaries kills you to access it. That’s about it though.
It won’t hurt you, so if you want to do it, do it.
If you died and don’t have a will, your assets will be settled by your state’s intestate laws.
If you wanted the money to go to the person or people who it would go anyway, well, all you’re doing is saving a little time and hassle. (Sometimes you’ll hear nonsense about the government automatically escheating (seizing) all your assets if you die without a will, but that’s nonsense.)
Fortunately, your annual risk of death as a young person is about 1-in-1000, so this 1-in-1000 chance of a small delay isn’t necessarily a critical error for most single young people.
Yes you should. The only harm is if you pick Jane and Jane dies before you then you have to update it. Or you put in Jane but you and Jane have a falling out. Pick someone you trust.
No downside to you, because you will be dead. If you have multiple siblings or multiple children etc you can split it up (I have my two siblings as beneficiaries, each getting 50%).Â
No requirement to inform the person, either.Â
Yes, having a named beneficiary is helpful if you want that money to pass to the pass onto the beneficiary outside of probate. If you don’t know what probate is, this is the process that occurs once someone dies. When you die, your assets become part of your estate and it needs to be assessed, creditors paid out and only then does the remaining assets transfer to heirs or whomever is named in the will. This process can take over a year if there are no complications and can cost a lot of money if the estate is sizable. The probate fee is based on what your state’s probate laws are but basically it’s a percentage of the value of the estate–the more valuable the estate, the higher the probate fee is owed to the lawyer and the administrator. Heirs won’t have to pay the probate fee, but the fee comes from the estate which can lessen the amount heirs inherit.
Using a beneficiary will bypass probate and prevent that money from being assessed. It can also prevent creditors going after that money after you die, though it won’t stop them while you’re living.
The only major caveat is to remember to update your beneficiary information ASAP if your life situation changes, such as getting married, a current beneficiary dies, you get divorced, setup a trust, etc. This is true with other financial accounts such as 401Ks, taxable brokerages and life insurance.
Also remember that even if you have a will or trust naming the account to go to so and so, whomever is the named beneficiary will get the money regardless of the terms of a will or trust.
It’s also important to be wary of naming minors as beneficiaries. You may not want someone to suddenly inherit millions at 18. This is where setting up a trust could play a role.
I lost my brother (33) and mom (58) within 3 months of one another, I was the executor of both. The difference in ease of handling the affairs were vastly, vastly different. Do your executor a favor, and have a plan in place.
PODs on bank accounts, beneficiaries on life insurance, HSA, investment accounts. Medical POA and a health directive (dnr / how invasive to be to save your life / life support), automobile title transfers etc. An estate lawyer is a worthwhile service to pay for to review everything and consider your options. I attended several free seminars before putting my plan in place, but my assets are easily handled with beneficiaries and I have no kids.
For myself, I made copies (labeled as copies) of all my documents, and sent them to my two siblings. The originals are in my home. Should I die, my bank accounts, my credit cards, employer details, investment accounts, medical insurance info etc are all in one place. I have a calendar reminder to review docs every 6 months, so if I need to change something I can.
“It’s sad that when you die, you first leave everyone else a headache to deal with” – a statement my brother made when we cleaned out my brothers place…. I’ll never forget those words.
Yes, absolutely do this as soon as you can. There is no downside and it won’t hurt you. Plus, it only takes effect if you die, in which case you are dead, you won’t care what happens after that. Make it easy on those you leave behind.