Bad Moves can be Costly for Loved Ones

5 Things to Consider When Naming a Beneficiary

When it comes to effectively transferring wealth, naming a beneficiary should not be simply overlooked. Through deep consideration when choosing  beneficiary, you can reap the benefits of time, frustration, and money saved. But, on the other hand, unthoughtful selections can have potentially serious consequences.

Consider the potential consequences when making decisions:

  1. Naming a minor - Clients should determine whether an 18-year-old with access to large sums of funds is what they want since minors inherit at the age of 18.

  2. Naming a special needs individual- A large inheritance could unintentionally disqualify that person from receiving future aid if someone receives government aid because of a disability.

  3. Naming an estate - Distributions to an estate go through probate and carry greater tax burdens than naming an individual beneficiary. A spouse has the option to roll over inherited retirement accounts into an IRA, while a non spousal beneficiary could establish a stretch IRA.

  4. Letting it ride - Just because someone named a person the beneficiary years ago, does not mean they would name that person today. Encourage your clients to review all beneficiaries regularly to make sure they reflect their current wishes.

  5. Leaving it blank - Encourage your clients to name a beneficiary for each of their accounts. Not naming a beneficiary assures the assets will go through probate, so they may not end up where your clients would have wanted.

There are several other strategies to consider when it comes to transferring wealth. To help with bill-paying and cash management tasks, adding a trusted child to a bank account will create a co-ownership arrangement that turns half of the account’s value into a gift and exposes it a child’s creditors. Also, due to balances being able to vary at anytime of inheritance, clients with more than one child should be cautious of naming each child as an individual beneficiary on separate accounts as a way of distributing wealth.

It is very important to consider all options when distributing wealth.

As always, we're here to answer any questions you may have when transferring wealth. Give us a call today!

*Material created by Raymond James for use by its advisors.