When it comes to estate planning, one of the most important decisions you’ll make is choosing your beneficiaries. A beneficiary is the person or entity you name to receive assets from your estate after you pass away. The way you choose to designate your beneficiaries can have a significant impact on how your assets are distributed, and it’s important to understand the different types of beneficiary designations available to you.
Primary Beneficiary Designation
One of the most common types of beneficiary designations is a primary beneficiary. A primary beneficiary is the person or entity you name to receive the assets from your estate first. This type of designation is often used for assets like life insurance policies and retirement accounts, as it allows you to specify who should receive the assets in the event of your death. If the primary beneficiary is unable or unwilling to receive the assets, the assets will go to a secondary beneficiary you’ve named.
Contingent Beneficiary Designation
Another popular type of beneficiary designation is contingent beneficiary. A contingent beneficiary is the person or entity you name to receive assets from your estate only if the primary beneficiary is unable or unwilling to receive the assets. This type of designation is often used for assets like bank accounts and investment accounts, as it provides a backup plan in case the primary beneficiary is unable to receive the assets.
Totten Trust (Payable-on-Death) Designation
A third type of beneficiary designation is a Totten trust, also known as a payable-on-death (PoD) account. With a Totten trust, you name a beneficiary to receive the assets in the account upon your death, but you retain control of the account during your lifetime. This type of designation is often used for assets like bank accounts, as it allows you to keep the account active and use the funds as you see fit while ensuring that the designated beneficiary will receive the funds after your death.
Joint Tenancy with Right of Survivorship (JTWROS) Designation
A fourth type of beneficiary designation is a joint tenancy with the right of survivorship (JTWROS). With JTWROS, two or more people own an asset together, and when one of the owners dies, the remaining owner(s) automatically inherit the deceased person’s share of the asset. This type of designation is often used for assets like real estate, but can also be used for bank accounts and other assets.
Reviewing and Updating Beneficiary Designations
No matter which type of beneficiary designation you choose, it’s important to review your designations regularly and update them as necessary. Life events such as marriage, divorce, and the birth of children can all affect your beneficiary designations. Additionally, you should also make sure that your beneficiaries are aware of your designations and understand how the assets will be distributed after your death.
It’s important to note that the above article is for informational purposes only, and does not constitute financial or legal advice. It is always recommended to consult a financial advisor or attorney before making any decisions regarding your beneficiaries or your estate planning.
This article was published by a third party and is intended for general informational purposes only and does not necessarily represent the views of Legacy Assurance. Some information may not apply to your situation. It does not, nor is it intended, to constitute legal or financial advice. You should consult with an attorney regarding any questions about probate, living probate or other estate planning matters. Legacy Assurance Plan is an estate planning services company and is not a lawyer or law firm and is not engaged in the practice of law. For more information about the beneficiary designation and other estate planning matters, visit our website at legacyassuranceplan.com.