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New England Capital Financial Advisors LLC News

Web Site: http://www.newenglandcapital.com
79 Main Street, South Meriden, CT 06451 - 5118
Tel: (203) 935-0265 Fax: (203) 935-0266

We are a financial planning firm whose purpose is to help our client's achieve financial success and accomplish their life goals through proper financial planning and wealth management.

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Why Beneficiaries Matter

July 24, 2024

Like many people, you may think about naming beneficiaries on an account when you fill out an application form, for an IRA or your 401k at work for example, and then put it out of your mind for a long time.

Let's start by reminding you why it's important to have named beneficiaries on your accounts.

When you pass away, your assets will go through the state court process that you've probably heard of, called probate, and it usually takes months and sometimes even years. In probate, all your assets are collected and then divided out per your will or, if you don't have a will, by the court following state rules. Your named beneficiaries, on the other hand, can take ownership of those accounts right away and avoid the time and expense of probate.

You're going to want to review them from time to time to make sure they still reflect your wishes. This is especially important after big changes in your life - like getting married or divorced, having a close relative pass away, or having kids. Marriage and divorce are especially important because whether your beneficiary is designated as a spouse or not can effect their choices if you pass away before them.

Another important thing to keep in mind is that your named beneficiaries on accounts will override what you have in your will. For example, let's say you want your IRA to go to your child..and you spelled that out in the will you created after the child was born.. But your sister is the beneficiary on that IRA from when you opened it years earlier.. there's a mismatch..and in this case, your sister can claim ownership of that IRA since the named beneficiary takes precedence over what you have in the will.

One last thing, it's important to have a back-up choice - and that's what a contingent beneficiary is. If your primary beneficiary is either unable or unwilling to claim the account when you pass away, then it would go to the contingent beneficiary automatically. If there is no contingent, the account would then go through the probate process.

Needless to say, these are important details to get right and there are other nuances that we're not even touching on here... such as special rules around 401k's and trusts. As always, if you have any questions.. please contact us anytime... and have a great day.

Member News is provided as a service of the Midstate Chamber of Commerce and is also featured in the monthly "Chamber News" newsletter mailed to members.