Take Care of Your Family When You’re Gone

Take Care of Your Family When You’re Gone

There is one thing each of us can do to ensure that our benefits have the greatest impact on our loved ones—especially in the event of our own passing.

The one simple thing is to update our beneficiaries. Each year, during open enrollment, take a look at the beneficiaries you have listed for each benefit that has them. Do you have critical illness insurance? Check the beneficiaries. Life insurance? Check the beneficiaries. Do you have a 401(k) plan, or more than one? IRAs? Brokerage accounts? Check, double-check, and triple-check those beneficiaries at open enrollment or when you have a major life event. If you only have a primary beneficiary listed, make sure you also list a contingent beneficiary (in case something happens to your primary).

Life is fleeting and fragile. We each think that we’re going to live forever, but we are not. And the young and healthy are not immune. My wife’s coworker lost his daughter on a hiking trip out west last month. She succumbed to an illness all but eradicated in the modern age. When we do pass, the sadness and loss for our loved ones will be devastating. The best we can do is prepare for the eventuality and be sure our family can readily access whatever measures we’ve set aside.

 If You Don’t Update

What happens if you don’t? First of all, your assets could go to someone you didn’t intend. Perhaps you are now in your second marriage, but your ex-spouse is still listed as primary beneficiary on several old accounts. You could set up serious family discord—nothing puts already sensitive nerves on edge like a money dispute.

If you don’t name beneficiaries, parts of your estate could end up going through probate in the courts. That means your loved ones will be waiting and wondering about their inheritances. And there is always the chance that your assets will be distributed in a manner in which you didn’t intend.

The Beauty of Beneficiaries

When a policy holder dies, insurance companies, retirement account trustees, and brokerage houses look at the beneficiaries first. They are not subject to the will probate process. If you are a primary beneficiary on a policy, IRA, 401(k), and many other account types, those assets come to you in the event of the account or policy owner’s death.

Primary v. Contingent Beneficiaries

There are two types of beneficiaries for most account types: primary and contingent. You can split up your assets in any manner of percentages, but it’s important to note that primary beneficiaries always take precedence over contingents. In other words, if you have two primary beneficiaries listed at receiving 50% of the account each and one of those primaries has also passed. The surviving primary beneficiary would receive the entire value of the account. The contingent beneficiaries would receive nothing.

That’s why it’s so important that your paperwork is up to date. Let’s say, for instance, you have two siblings listed as primary beneficiaries at 50% each, and four nieces and nephews listed as contingents at 25% each. Both of your siblings would need to be deceased for any of your nieces and nephews to receive any proceeds from that account.

Take a minute right now to check all your beneficiaries. Part of the reason you got that term life policy or maxed out that IRA was to take care of your loved ones when you pass on. Why not make absolutely sure those assets will go where you intended them?


Written by Stephen Trimble

Stephen is an experienced communications professional with a background in educational and internal communications. He is most excited by transforming complex and obscure subject matter into compelling content that readers are motivated by and can truly understand.

Trion Communications stephen.trimble@trion-mma.com