Deep Dive #3: What is a Beneficiary?
Because I get into some technical jargon, and I am NOT lawyer, I need to remind you that nothing here is legal advice. This is for educational purposes only. See the Terms and Conditions for more details.
The I Am Willing journey is designed with you in mind. That means every step in the process starts with you. In Deep Dive #1 we suggested you start the conversation about legacy planning with yourself, before talking to others. When we discuss wealth, we start with who you are and what you own of value, beyond just assets. Now, we’re going to expand that circle and think about your friends, family, and other loved ones — all of these people (and organizations, too!) are potential beneficiaries of the wealth you leave behind. So grab your list of wealth and let’s get started with some Q&A about beneficiaries.
So what is a beneficiary?
A beneficiary is someone (or sometimes an organization) that you choose to receive a benefit after you die.
Who or what can be a beneficiary?
A beneficiary can be a person, related or unrelated. A beneficiary can also be an organization, often a non-profit, like your church.
Does it have to be one person?
No, you can usually name more than one beneficiary, say if you want two siblings to benefit. You can also name a “contingent,” which means the next person in line if the first choice isn’t available.
I’ve got my list! What can I leave to my beneficiary? First, think about the money in your bank accounts, like checking, savings, and retirement. And don’t worry whether it’s a little or a lot. Remember, it’s a gift! Many banks allow you to name a beneficiary online right inside your account! If you don’t bank online, they can send you the forms. Give them a call today.
Now, check your list again. What else would you like to leave to someone? Jewelry for your nieces? Shoes for your nephew? Clothes for a sibling? Don’t forget family recipes and recorded stories! You can also leave instructions for your family to make a donation in your name. And even instructions on what your family should do with your stuff.
So if I don’t get around to it, what will happen? You bank accounts will probably be frozen until a court decides what to do on your behalf. The money might go to your parents, siblings, children, or others. Your family will be stressed out not knowing what to do while waiting for a court to decide.
Your family won’t just lose money, they’ll lose sleep, a sense of connection, an opportunity for closure, and peace of mind.
I think my parents have a will - do they need to name beneficiaries, too? Yes! The people they listed in their will should match what they have on their accounts so there’s no confusion. By doing both, the beneficiaries will get faster access to “payable on death” accounts, while waiting for a court to confirm and execute the rest of the will.
What if I change my mind? Good news! You can change your beneficiaries anytime. In fact, it’s good practice to review it every 12 months or so.
Do I have to tell the person or organization that they are a beneficiary? There are good reasons on both sides of this. If you’ve started the conversation (see a theme here?) you may feel comfortable letting your spouse, for example, know that they are a beneficiary. You can also tell them that if anything changes you’ll have another conversation.
But! You might also have a reason to keep it to yourself because things might change. Today you might name a cousin as beneficiary because she’s in a rocky place and you want to help her and her kids, if something should suddenly happen to you. But after the kids are 18, you might decide to name someone else.
There’s honestly no wrong person to name as a beneficiary. As long as you feel good knowing they will receive your gift, you’ve hit your milestone in your legacy planning journey.