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Can it Wait? Choosing a Beneficiary – Know When it Matters

Elderly woman and beneficiary daughter smiling together.

You may have heard the saying, “Expect the best, and prepare for the worst.” Financially, this is great advice. Expecting the best positions you mentally for great opportunities, but when life throws you a curve ball, you’re ready.

In today’s world, nothing is certain. That’s why savvy individuals prepare for the future, and you should too. Whatever life has in store for you, one of the best ways to be ready is to establish a beneficiary to inherit what you’ve worked hard to save.

To Heir is Human

An inheritor doesn’t always mean your spouse or child, although in many states a spouse has automatic special rights. For example, in all states your 401(k) goes to your spouse, unless you specify otherwise. However, most adults have value invested in multiple accounts, not just retirement savings, so it’s important to make your wishes clearly known. A beneficiary can be a friend, family member, charity or trust. Once you’ve chosen your beneficiaries, you can think about timing.

When to Choose a Beneficiary

Everyone goes through life changes, both major and minor. So when should you choose a beneficiary?

Good question.

The short answer is early… and often. If you’re young and just starting out, opt for a quick and simple will available online to get started, then review it every year or so as things change. Not only do relationships change, so do assets and circumstances. Naming a beneficiary early on may seem unnecessary, especially if you believe you don’t own much. However, the thought of any asset falling into the wrong hands should be motivation enough to consider a will.

A Good Beginning Makes a Good Ending

If you’re further along in life and feel more established, you may especially sense the pressure to get your ducks in a row. No one likes to think of leaving loved ones behind, but the transition can be much easier on your nearest and dearest if you know you’re not leaving them with an expensive organizational nightmare.

You don’t need to be wealthy to do the work of estate planning. In fact, you don’t even need to own an “estate” or home. Your savings accounts, life insurance, retirement accounts, assets and more will be distributed someday, and the more you have, the more complicated it will be. A financial adviser can help you organize and administer every specific desire you have.

As for timing, the sooner you choose a beneficiary, the better.

The Best Laid Plans

Once you’ve established your successors for each asset or account, the subject needs to be reviewed every two years, or when a change to your lifestyle occurs. For example, if you get a promotion with a big pay raise, a new baby arrives, or you yourself inherit an estate. Tax season is another good time to review your beneficiaries, since your assets and debts are all out in the open to review.

Expecting the best while preparing for the worst means your loved ones will get the very best of your efforts, and the sooner you start preparing, the sooner your assets will be theirs to claim. Leave a comment below to share with fellow CESI Solutions readers about any of the steps you’ve taken to prepare for the worst.

Image Source: Bethany Johnson


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