Naming Your Beneficiaries

Naming Your Beneficiaries

May 17, 2024

Why It Is Critical To Name Proper Beneficiaries For Your IRAs, 401(k)’s, Life Insurance And Any Other Account That Allows You To Name A Beneficiary


As your advisor, we strive each and every day to ensure that your retirement dreams become reality.  We meet with you to discuss your dreams, your goals, your risk, your fears and your desires. When we opened your retirement account(s), we discussed with you whom you want to name as your primary and contingent beneficiaries. As time has passed, things have most likely changed in your life.  Maybe you lost your spouse, you got divorced(typically your primary beneficiary designee) or your children upset you and you no longer want them to inherit your funds(your contingent beneficiaries). Whatever may or may not have happened since your account was opened, we wanted to send you a reminder to PLEASE confirm your primary and contingent beneficiaries each year and notify us if changes need to be made.  We want to make sure your money goes to the person(s) you want and not to anyone else. You will notice on your monthly brokerage statement that your beneficiaries are listed.  For those of you with annuities, please reach out to our staff as they can quickly confirm your beneficiaries. If you do not have your life insurance with us, please contact your life insurance company and/or agent to verify with them.  And lastly, if you have qualified plan with your employer such as a 401(k), 403(b), deferred compensation plan, PERS, CalPERs, etc., please verify with them also as well as your banking institutions. If you have a living trust, this would be a great time to review it and ensure your taxable monies and assets are going to the correct person(s) and the accounts are properly titled under your trust name.

Why Do Beneficiaries Matter?

Direct Transfer Of Assets

One of the primary reasons for designating beneficiaries is that it allows for the direct transfer of assets upon your death, bypassing the often lengthy and costly probate process.  This means your beneficiaries can receive the funds more quickly and without the costly and stressful administrative burden of probate court.

Your Wish Should Be Your Command

By naming specific individuals as beneficiaries, you ensure that your assets are distributed according to YOUR WISHES.  Without designated beneficiaries, your assets might be distributed according to state and/or federal laws, i.e. the

government will be making the decision (something none of us want), instead of YOU deciding who should receive your hard-earned assets.

The “Tax Man”

Not properly designating beneficiaries can also have significant tax implications.  For instance, a spouse beneficiary on an IRA has the option to roll over the IRA into their own IRA, potentially deferring taxes and continuing to grow the retirement account.  Non-spouse beneficiaries, on the other hand, have different rules that can

affect how and when they must take distributions.  We would like to mention that some of these rules have recently changed.

No Fighting At The Holiday Dinner Table

Many times at the holiday dinner table, two things are brought up…..politics and money.  If you want to avoid family conflicts, please name the proper beneficiaries.  Some clients choose to let these people know, while others want it to be a surprise.  Remember, you can name whatever percentage you want to each beneficiary, and you can have as many primary and contingent beneficiaries as you choose.

No Generalization

Be specific when designating beneficiaries.  Full names, Social Security numbers and clear descriptions of the relationship can prevent confusion and ensure the correct individuals receive the intended benefits.

The Forgotten Beneficiary…..The Contingent

Always name contingent beneficiaries.  These are individuals who will inherit the assets if the primary predeceases you or is unable to claim the asset.  This adds a layer of security to estate planning.  Our preference is to NOT name your living trust due to potential tax implications.  Please let us know if you need further explanation.

Get Into The Habit

We recently did a radio show on the importance of performing an annual financial checkup.  When doing so, please make sure that you are reviewing your beneficiaries and trust information for accuracy at least once a year.

Match Em’ Up

Many times, when we compare IRA beneficiaries to living trust beneficiaries, they do not match.  This can create a legal nightmare.  Make sure you’re matching both of these beneficiary designations, so no conflict arises.

Understanding The Rules (this is why you have us)

Different plans have different rules.  For example, 401(k) plans require spousal consent if someone other than the spouse is named as primary beneficiary.  Naming a living trust as a primary or contingent beneficiary can have significant tax implications over naming individuals.  These are just a few examples of “knowing the rules”.  But remember, this is why you have us!


Naming the proper beneficiaries on your IRA, 401(k), life insurance, banking accounts and living trusts is a vital part of financial planning.  It ensures that your assets are distributed according to YOUR WISHES, can potentially provide tax advantages, and helps to avoid family disputes.  By taking the time to carefully designate and annually review your beneficiaries, you provide a clear and direct path for your legacy, giving peace of mind to both you and your loved ones.  As always, we are here to help you or answer any questions you may have.


Jon G. Sanchez, CEO Jason E. Gaunt, CFP®, COO

Leave a Reply

Your email address will not be published. Required fields are marked *

This site uses Akismet to reduce spam. Learn how your comment data is processed.