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Why a Beneficiary Matters

October 17, 2022

Why a Beneficiary Matters

Whether you’re purchasing life insurance, setting up an investment fund, or making adjustments to your retirement account, deciding where your money will go after your death is an important part of the process. Most financial institutions will require you to name a beneficiary on the day that you open a new account, but you or your financial advisor can generally make adjustments at any time. By choosing a beneficiary, you ensure that the programs, services, and benefits that you’ve paid for will go exactly where they’re needed most. 

At IntentGen Financial Partners, we want every person who walks through our doors to live intentionally, with purpose—and selecting a beneficiary is one of the easiest ways to help your purpose live on after you’re gone.

Below, we’ve laid out more information on why choosing a beneficiary is so important, and what you may wish to consider as you make your choice. Keep in mind that this material is for informational purposes only, and that you should consult your financial advisor before making any changes to your existing accounts.

Why Should You Select a Beneficiary?

Although certain states may place limitations on who can benefit from a retirement fund, you are generally free to select any beneficiary when you are setting up or making changes to your accounts. Here’s why choosing a beneficiary is a step that you should never overlook:

  1. Choosing a beneficiary is an excellent way to ensure that your money benefits the people and the missions that matter most to you.
  2. When you know who your beneficiaries are, you can enjoy peace of mind as the years go by.
  3. Choosing a beneficiary eliminates the risk that a court will have to make important decisions about your money.
  4. If a beneficiary is not chosen, it can lead to conflict among your family after you’re gone.
  5. In the event that the courts need to get involved, failure to choose a beneficiary can lead to an unpleasant, drawn-out process that prolongs grief.

When you select a beneficiary, you may also be asked to name a trusted contact. This decision is no less important, and it’s crucial to select someone who will act as your ally.

How to Choose a Beneficiary

In most cases, you can select as many primary beneficiaries as you like, dividing your assets amongst them in whichever way you see fit. Certain accounts may also empower you to select contingent or even tertiary beneficiaries, who will be second or third in line in the event that one or more of your primary beneficiaries is unable to receive the money.

Regardless, choosing a beneficiary is a decision that should never be made lightly. Keep these guidelines in mind:

  • Many people determine their beneficiaries on the basis of need. Think carefully about the people in your life to ensure that your loved ones will be well taken care of after you’re gone. 
  • It’s also wise to consider which beneficiaries are best suited to advance your intentions and work toward the ends that you shared in life. Part of living intentionally is talking to your beneficiaries about the dreams and goals that matter to you. If you’re worried about how the money will be used, setting up a trust* is one potential solution.
  • Different types of accounts may be more useful for some beneficiaries, and less so for others—and this is where things can get complicated. Talk to a financial advisor to explore which people in your life have the most to gain from each different type of account that you’re managing. Making the right decisions can lead to a lower total tax burden and/or greater security for the people that you care about.

Manage Your Money with Purpose

Whether you’re actively building your estate or living out your golden years in retirement, choosing a beneficiary shows that you care about the people in your life and want the best for everyone after you’re gone. Our financial advisors are here to help you make the right decisions at the right time, so don’t hesitate to learn more about working with our team. While you’re here, you can read through some of our other articles or reach out directly to speak with an expert. Just let us know how we can help.

*Using a trust involves a complex set of tax rules and regulations. Before moving forward with a trust, consider working with a professional who is familiar with the rules and regulations.