Estate planning is more than simply deciding if you need a will or a trust. Instead, it is a comprehensive review of all of your assets, possessions, and other affairs and ensuring everything would be handled according to your desires and goals in the event of your passing. This includes assets like a home or farmland as well as assets like retirement accounts, pensions, and investment accounts. While the disposition of assets that typically pass through probate (such as a home or real property) is typically controlled through a will or trust, the disposition or distribution of assets such as financial accounts is handled through beneficiary designation forms.
Distinction Between Primary vs. Secondary Beneficiaries
A primary beneficiary is a person or entity who is “first in line” to receive the proceeds or benefits of the applicable account. For example, if a person’s life insurance policy designates the person’s spouse as the primary beneficiary of the policy, then the spouse will, upon the person’s death, be the person who will receive the proceeds of the policy.
A secondary beneficiary, by contrast, is a “back-up” beneficiary who will only receive the proceeds or benefits of the applicable account if no primary beneficiary is able to do so. Using the above example, suppose the person’s life insurance policy designates the person’s son as a secondary beneficiary. If the person’s spouse is deceased at the time the person dies, then the son would stand to receive the policy’s benefit.
Accounts such as retirement accounts, investment accounts, and transfer-on-death deposit accounts should have at least one primary beneficiary designated for that account. It is also a good idea to designate at least one secondary beneficiary, as doing so provides the account holder greater control over the disposition of the account once the holder dies.
No Uniform Document to Designate Beneficiaries
There is no one form – or one template – that all financial institutions or investment outfits must use for clients to designate their choice of beneficiaries. As a routine practice, though, most institutions that permit clients to designate beneficiaries for their accounts will provide the requisite forms during the initial account opening. In addition, these forms are generally available on request from the institution.
Despite the lack of uniformity in appearance on these beneficiary designation forms, each of these forms will have a space where a person can designate primary and secondary beneficiaries. These forms, once completed, would then be returned to the institution.
No Limit on Number of Beneficiaries
A person is generally able to designate as many primary and secondary beneficiaries as they may choose. If multiple beneficiaries of one type or the other are chosen, the account holder will have the option of specifying what percentage of the proceeds each beneficiary would receive. To return to the example above, if the person instead designated both their spouse and son as primary beneficiaries, the person could specify that the spouse is to receive 75 percent of the account’s benefit while the son is to receive only 25 percent.
Identifying beneficiaries and what percentage of your financial accounts each should receive upon your passing are not decisions to be made lightly. Seek help from the experienced and knowledgeable estate planning team at Dawes Legal, LLC. Sometimes it can be difficult to know how to arrange your affairs so as to achieve the goals and objectives you would have for your family or beloved causes following your death. Call our office at (614) 733-9999 to schedule a consultation with us and learn how to best safeguard your family and interests after your passing.