It’s a beautiful thing to have a Will with the names of the beneficiaries for your wealth. Whether it’s a life insurance policy application that you are finally filling out or not. There is always the back page where beneficiaries are supposed to be listed. You may think it’s not important, and you sign in names randomly without thoughts.

This feature in your form is a very important one, and you have to pay close attention to the details given. Read on to discover the obvious encounters you are likely to have. This way, you will know what decisions you should take about who your beneficiaries will be.

Why should you have beneficiaries?

For your understanding, you must know what will happen to your properties in the event of death.

The first scenario is your loved ones going through the process of probation which is highly expensive. It is likely to get messy if you have relatives fighting over your assets. This happens if you have a will written down.

If you die without writing your will, your money will be wasted, because your assets will be handed over to the legal system to sort them out. Your loved ones are likely to not get anything.

The solution for all of these is to have designated beneficiaries. This solves the problem of overhead costs, court involvement, etc. Your designated beneficiaries will each have access to your assets depending on the percentage you allocated to them.

Once you breathe your last, your beneficiaries will issue a death certificate to the financial institution, fill out a form, and gain access to your assets as proposed in the will.

What are the essentials of completing a beneficiary form?

While you are filing in the designated beneficiaries, you have to decide who gets what, and how many percent. You should think thoroughly if your beneficiaries will make good use of the sums allocated to them or not. Will they invest it in stocks, bonds, or real estate or waste it down the drain? However, if you have concerns over the abuse of your wealth by your beneficiaries, there is a way out.

Read also: Do you consider yourself middle class?

Life insurance and annuities

A lot of life insurance and annuities companies have forms that allow you to decide how beneficiaries get their benefits. They are generally three options available for them and they include;

  • Lump-sum
  • Period certain
  • Amortization(done over the beneficiaries life’s expectancy)

It is possible to split the benefits in a way that they get part of it as a lump sum and a systematic payout as balances.

Read also: 7 reasons life insurance is a good investment portfolio for you

Individual retirement account

It’s very possible that IRA might not have the same payout options for your beneficiaries as life insurance and annuities do. When you open an IRA account, you are entitled to a standard beneficiary form which allows you to name only a primary and secondary beneficiary.

Therefore, your objective doesn’t determine the payout for your heirs. Instead, you will be working with the custodial institution’s policy. So, you do not get to decide how your heirs receive your wealth and assets.

Another problem with this insurance policy is that if you had three heirs, and you said each other should get an equal amount. If one of them dies, and you die too without rewriting the will, the other two get the share of the deceased. This takes away the event in which the family or children of the deceased might access the share of their deceased parent.

What are the rights of your beneficiaries?

The rights of your heirs will be specified by you while filling the form. You can be asked that your heirs get only a certain amount per month, or transfer funds from one end to another, or have certain minimum distribution, etc.

Attorneys are in the position to prepare IRA assets for you. You can ask your accountant or financial advisor to recommend a good attorney for you. You should submit the documents to the custodian for a signature once you are done.

Read also: 4 Retirement Expenses that will shock you

Most custodians will accept the form conditionally, while others won’t. Those who accept the form may ask that the document shouldn’t conflict with the terms of their custodial agreement. And those who don’t accept the form conditionally will require a disclaimer that promises to not hold them responsible for anything. Getting a custodian to accept the form or not depends on how persuasive you can be and probably the size of your account.

How do you reduce the burden for your beneficiaries?

There are instances where your heirs may not need the money in your IRA instantly. For instance, a professional heir will be required to give 37 cents of every dollar up to the IRS for her inheritance.

To help reduce the tax burden on your heirs, you make the inheritance stretch over 10 years of their lifetime. This will also maximize the total amount she received at the end of the due period.


While signing the form, think about not just who gets your wealth and assets, but how. You need to renew any of the retirement forms(annuities, IRA, life insurance, etc), every year.

If your form gets missing, all you have to do is contact your financial advisor, agent, or IRA custodian.

There is a tendency that your beneficiaries will not be thrilled by the ways you decide the share of your inheritance. The good thing about making this decision early is that you will be rest assured your loved ones will be getting your wealth, and it will last as long as you hoped for.

Previous articleDo You Consider Yourself Middle Class?
Next articleSave or invest, how do you decide?