Did you recently become a parent? Did you get married? On the other side of the coin did you get divorced? Any of these life events in Maryland warrant a review of the beneficiary designations on your financial account as part of the estate planning process. Some of these accounts may include retirement accounts, pension plans, life insurance policies, annuities and “Transfer on Death” or “Payable on Death” accounts. The following is a brief overview of beneficiary accounts.
What are the three types of beneficiary designations?
There are three types of beneficiary designations: primary, contingent and tertiary. The primary beneficiary is the first in line to receive account funds should you pass away. If the primary beneficiary dies before you do, the person designated as the contingent beneficiary on the account will receive account proceeds when you pass away. When there is more than one primary or contingent beneficiary, you will have to designate the percentage of the account each is to receive. Finally, there are tertiary beneficiaries. A tertiary beneficiary is the individual who would be third in line should both the primary and contingent beneficiaries predecease you.
Why should I keep my beneficiary accounts updated?
One of the biggest advantages of beneficiary accounts is that they bypass probate, meaning the funds in these accounts pass directly to the named beneficiaries upon your death. That is why it is essential to review who you have designated as a beneficiary periodically and especially during key life events such as births, marriage, divorce and deaths. For example, if you named your wife as a beneficiary on your life insurance policy, and later divorce, you will want to remove your ex as beneficiary, so he or she will not receive the proceeds from that policy should you suddenly die.
Learn more about beneficiaries and estate planning
As this shows, beneficiary accounts have advantages, but they need to be periodically reviewed. Maryland readers should be aware that this post does not contain legal advice applicable to any specific person’s situation. To learn more about estate planning, you can visit our firm’s website for further information.