Ruby helps you and your family work together to prepare and organize finances.
Legal documents like wills, titles, deeds, and health insurance policies often become outdated when it comes to beneficiaries. Horror stories about people who accidentally left their financial legacy to an ex because their documents were not updated happen more often than you’d like to imagine.
What does Beneficiary Mean?
A beneficiary is a person or institution who receives money or property when somebody dies. A beneficiary can be named within a will, but can also be listed in the small print of financial accounts like a life insurance policy, annuity, or retirement account.
… And Why Does it Matter?
It matters because, in some cases (see below), your designated beneficiary holds more weight than your will.
This means that, no matter what you say in your will, it’s the name listed next to “beneficiary” that actually gets the money.
Let’s start at the beginning.
Where there’s a will…
With a will, your loved ones must still go through the probate process to get what you left them. This can get expensive, and it can take months or even years if a disgruntled relative starts a fight about your assets.
Without a will, your possessions become part of your estate, and it’s left to the legal system to sort things out. For your heirs, this means more time wasted, more frustration, and more fight for what is their rightful inheritance. (For more on this, read Why You Should Draft a Will.)
… there’s a way.
With beneficiaries, you list who will get the money and what percentage each will receive. Then, after you pass away, your beneficiaries present a death certificate to the financial institution and fill out a form. The check arrives in a few weeks. There’s no probate, no court involvement, no expense. Your money ends up in the right hands, with no hassle.
So what outweighs a will?
Here’s a list of things that aren’t covered by a will. These assets go directly to the beneficiaries named on the account documents – they do not have to go through probate.
- Retirement plan assets from plans like IRAs and 401(k)s
- Life insurance policy proceeds
- Life insurance policies that have a space for you to designate beneficiaries.
- Payable on Death (POD) bank accounts
- Transfer on Death (TOD) investment accounts
- Brokerage Accounts
- Property with joint tenancy
- Revocable living trust