A beneficiary is a person or entity that you name to receive the proceeds of your financial assets when you die. A beneficiary can be a spouse, child, relative, friend, charity, trust or any other entity you choose. Choosing a beneficiary is an important part of your estate planning, as it determines who will get your money and how they will get it. Depending on the type of asset, you may have different options and rules for naming a beneficiary.

How to choose a beneficiary for your insurance contracts?

Insurance contracts include life insurance policies, annuities and other contracts that pay a death benefit. You can name one or more primary beneficiaries, who will receive the money first, and one or more contingent beneficiaries, who will receive the money if the primary beneficiaries are not alive or cannot be located. You can also specify the percentage of the benefit that each beneficiary will receive. You can change your beneficiary designation at any time, unless you have an irrevocable beneficiary, which means you cannot change it without their consent. To name or change a beneficiary, you need to fill out a form provided by your insurance company and submit it to them.

How to choose a beneficiary for your bank accounts?

Bank accounts include checking accounts, savings accounts, certificates of deposit and other deposit accounts. You can name a beneficiary for your bank accounts by using a payable on death (POD) or transfer on death (TOD) designation. This means that the money in your account will pass directly to your beneficiary without going through probate, which is the legal process of settling your estate. You can name one or more beneficiaries and change them at any time. To name or change a beneficiary, you need to fill out a form provided by your bank and submit it to them.

How to choose a beneficiary for your qualified money accounts?

Qualified money accounts include retirement plans, such as 401(k)s, IRAs, pensions and other tax-deferred accounts. You can name one or more beneficiaries for your qualified money accounts, but you may have some restrictions depending on the type of account and your marital status. For example, if you are married and have a 401(k) or a pension, you may need your spouse’s consent to name someone else as your primary beneficiary. If you have an IRA, you may have more flexibility to name anyone as your beneficiary, but you may also have to consider the tax implications for your beneficiary. To name or change a beneficiary, you need to fill out a form provided by your plan administrator or custodian and submit it to them.

It is all about planning and making sure your assets are left to those you want to have inherit. Selecting a beneficiary is an easy step in the right direction. One of the biggest mistakes you can make is not reviewing your beneficiary choices with a legal or financial advisor.

Remember, beneficiary designations are designed to ensure you leave your assets to whom you wish. If not, your assets could be subject to the probate process which could reduce the size of your estate and delay transfer. Take the time to carefully select your beneficiaries and then occasionally review those choices.

Lyle Boss, a native Utahn, is a member of Syndicated Columnists, a national organization committed to a fully transparent approach to money management. Boss Financial, 955 Chambers St., Suite 250, Ogden, UT 84403. Telephone: 801-475-9400.