How to Choose a Beneficiary

Winter 2012-2013

Choosing who gets what after you’re gone can be a burdensome task. With proper planning, however, your desires for how your wealth should be distributed in the future may be realized. Lee Sorenson, Financial Planner for The Private Client Reserve, gives advice on how one can designate assets to specific beneficiaries and the potential implications of each decision. Although Sorenson and other U.S. Bank representatives don’t provide tax or legal advice, or draft legal documents, they can offer guidance on what items you should consider.

What are the first steps to designating beneficiaries?

Ask yourself three key questions:

  1. “Who should benefit from my estate?” Perhaps you want your spouse, children, grandchildren or a charity to be your beneficiary.
  2. “Of those people or entities, how much do I want each to receive?”
  3. “What is the best way to get it to them?”

How can assets be designated to beneficiaries?

Typically, your will — and/or revocable living trust — dictates how your assets are distributed after death, but another method is through beneficiary designations.

Lee Sorenson; photo by David Bowman

You can designate specific beneficiaries for retirement accounts (401(k), IRAs, etc.), life insurance and annuity contracts. In addition, bank accounts can have “pay on death” or “transfer on death” designations.

But it’s also important to consider how an asset is owned. The titling of an asset can dictate where it goes after you pass away. For instance, if your house (or investment account) is owned by you and your spouse as “joint tenants with rights of survivorship,” when you die, your spouse will get that asset regardless of what your will says.

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