Five Questions on Choosing Beneficiaries By Financial Advisor Alan Mercurio in Louisville Kentucky
UBMI Publications
November 16, 2009
Who do I choose as a beneficiary?
This is an important question that requires serious consideration. Let us begin by defining a beneficiary. A beneficiary is a person or other legal entity who receives money or other benefits from a benefactor. A beneficiary is typically a living person, a trust, an estate, an organization or a combination of these. If you designate multiple beneficiaries, you may choose the percentage of assets you want them to receive; otherwise, if they will share your benefits equally. You usually have the option to name contingent, or secondary, beneficiaries in the event your primary beneficiaries are not alive or in existence at the time of your death.
Why is it so important to name a beneficiary? Wonīt my WILL take care of that if I donīt choose one?
You are correct, if you do not choose a beneficiary for your important assets, it will ultimately fall to your WILL and the assets will then be distributed accordingly; however, there are some things you should consider. For instance, a beneficiary designation will allow an asset to pass much more quickly than your WILL. In most states, a WILL needs to be probated, adding time and expense to the delivery of the asset to the intended party.
How often do I need to review my beneficiary designations?
Beneficiary designations should be reviewed annually. Things change in life. Children marry and have babies. Loved ones pass. Staying on top of plan is critical. Your beneficiaries must be reviewed. Please remember that each time you submit a beneficiary form, the new beneficiary designations replace all previous designations for that particular plan. Complete both primary and contingent beneficiary sections if you intend to have contingent beneficiaries. Leaving either section blank will void current designations for that section on previous forms. If you need to name more beneficiaries than space allows on the form, you are allowed to list them on separate sheets of paper and attach them to the beneficiary form. Your date and signature, and sometimes your owner information, such as policy number or social security number, are required on beneficiary selections submitted on separate sheets of paper. Also, only beneficiary designations received by insuring companies or employers before your death will be considered official.
Should I name a trust as the beneficiary of my IRA?
NO, unless itīs the only option and you know exactly what you are doing. In my opinion, if you have multiple beneficiaries to the trust, it is more difficult to split them than it would be if they were beneficiaries to something like an inherited IRA. If the trust fails to qualify as a designated beneficiary, then you can loose the ability to stretch the IRA over the lifetime of the individual beneficiaries.
What does Per Stirpes mean and how should I use it?
Per stirpes is a method for distributing the estate of a deceased individual. Per stirpes (which is Latin for "per branch") specifies that each branch of the deceased person's family receives an equal share of the estate, regardless of how many people are in that branch. For example, if A and B are the children of the deceased, but B is also deceased leaving children C, D, E, F and G (the grandchildren of the original person), then A would receive one half of the estate and each of B's 5 children would receive one-tenth of the estate (essentially, they are dividing B's half among Bīs children). Per stirpes is different from per capita, because per capita weighs each person equally, rather than each branch equally.
When deciding who will be your beneficiaries, be mindful of the weight of your decision. Do not take beneficiary designations lightly. If you have not been careful assigning your beneficiaries, I encourage you to go back and evaluate your choices. Many individuals are given the option to "change this any time you want." The problem is that most people never go back and revisit their decisions. Out of Sight; Out of Mind. Loved ones and other heirs could be left out due to unintentional oversights.
For more information about designating beneficiaries, go to our website at www.mercurioadvisors.com and click on contact us for your free plan review.
Alan Mercurio
Mercurio and Associates Inc.
330 N. Evergreen Rd., Suite #3
Louisville KY 40243
502-253-9366 or 866-672-5456
Registered Representative offering securities through First Allied Securities Inc. A registered Broker/Dealer Member FINRA/SIPC. Investment Advisor Representative offering services through First Allied Advisory Services Inc.
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