Financial Wellness Spotlight

Designating Your Beneficiaries

It's never too early to show your loved ones how much you care. This article will help you understand what to consider, which accounts are important, and how to get started with designating your beneficiaries. 

A Benefit for all Ages

Assigning your beneficiaries is an action you can and ought to take at any age. You might just be getting started, with only a savings and checking account. You might have a 401k, life insurance, or investment and retirement accounts. Wherever you are along your financial journey, even if you have a Will in place, a beneficiary review is for you. 

Why Designate My Beneficiaries?

You work (or have worked) hard for your money! It’s not always pleasant to think about, but as they say, you can’t take it with you when you go. Having named beneficiaries and clear instructions that are updated regularly means that your loved ones can have timely and direct access to specified accounts and benefits. Death benefits from life insurance, retirement account funds, deposit account balances, and even vehicles can be automatically inherited by your beneficiary. In a court of law, beneficiary designations will supersede a last will and testament and even biological next-of-kin. Taking these steps now can avoid the painful process your loved ones may face in Probate Court. 

Schedule an Annual Review

It’s important to schedule an annual review for yourself. Probate court causes the most distress to families when their passed loved ones had neglected to update their named beneficiaries. Life events may change your wishes. While its never a bad time for a review, the beginning of the new calendar year is a great time to “schedule” your annual beneficiary review. Why? Whether you’re working or not, you’ll likely have begun gathering all your necessary tax forms in order to begin filing. You’ll likely have a very clear illustration of your finances in front of you.

Getting Started

  • Visit the Credit Union to confirm you have assigned beneficiary designations for your Deposit, Checking, HSA, and/or Certificate accounts.
  • Contact your employer’s Human Resources Department and ensure the correct person(s) are listed as beneficiaries for your 401(k) and any additional employer provided or sponsored life insurance policies.
  • Ensure you have updated any IRA, investment, or life insurance accounts. These can often be updated online if they are accounts you can view electronically. 
  • Visit the Ohio BMV Title Office with your vehicle title and add a TOD (transfer on death) designation. This allows your vehicle to be immediately transferred to the person you designate. (This is not needed if you intend for your vehicles up to the approximate value of $65,000 to transfer to a surviving spouse.)

A Few Tips to Keep in Mind

  • List only LEGAL names, and list them carefully. It is a good idea to include birth dates or other identifying information to avoid any confusion. Social Security numbers may be requested.
  • Consider listing “contingent” or secondary beneficiaries.  This way if your beneficiary pre-deceases or passes with you, the next in line will be taken care of.
  • 401(k), 403(b) and most pension plans require listing a spouse as your beneficiary.  To decline this designation, it will require their signature. Handle these thoughtfully as tax and distribution consequences vary depending on the specific situation.
  • Consult financial planning or legal experts if you have specific concerns or circumstances. For example, minors cannot receive life insurance benefits directly.  Blended families also often require special handling.
    • A Will and perhaps a trust will be needed to determine how other assets are distributed, and in order to name guardians for minor children. Ensure that you also have these documents updated and in place.
  • Ensure that Your Loved Ones Know your Intentions. Take the time to show your loved ones that you care about their financial future. Though it may be difficult, it is important to communicate your intentions with your intended beneficiaries. Financial institutions and insurance companies are often not obligated to contact them on your behalf. In most cases, there will also be required applications or claim forms. This process will not be burdensome for your loved ones if the right tools are in place; most applications can be made with a death certificate and photo ID.

Let Us Help

We are here to help you avoid an unnecessary burden and unfulfilled wishes. For more information about how to manage your BMI accounts or for further Financial Education, call us at 614.707.4000, stop by any of our five branches in Dublin, Westerville, or Columbus, or visit our Financial Education page.