Too Young for a Last Will? Avoid Probate Court With Beneficiaries
Today we’re going to tell you about something that really matters to you…and can be done in under five minutes.
Your to-do from LearnVest today: Name beneficiaries for all of your bank and brokerage accounts. It’s very important and incredibly simple, we swear.
It could mean the difference of many thousands of dollars.
1. YOU care about this, no matter what!
Beneficiaries are the loved ones you’d want to have your money if—heaven forbid—something happened to you. It might not make sense for you to go through the hassle of creating a will if you’re young and don’t have children. But, regardless of your age and stage of life, you should tell the bank who your beneficiaries are. All that means is that you’ve stated exactly who your money should go to.
2. Skipping this can reduce your loved ones’ inheritance by 7% for no good reason.
Although exact costs will depend on where you live and how much you have, probate (this process of getting the money where it belongs) can reduce the amount you give to your loved ones by 7%. Average probate costs are around $2,000. Wouldn’t you rather that money just go straight to your family, instead of to a bunch of probate lawyers? If you name people off the bat, there’s no fuss.
3. The actual process is a cinch. Two minutes, flat.
Seriously. You don’t even need to go to your bank in person. Follow these steps:
- Call your bank and ask what forms you need in order to name beneficiaries.
- Fill out those simple forms. All you need is your beneficiary’s name, date of birth, contact info, and, sometimes, Social Security number.
- Send the form back (we just faxed it to our bank) and you’re done.
4. Which accounts are worth it?
Any account with a substantial amount of money. This includes your retirement accounts like 401(k)s or IRAs, your life insurance policy, and your checking and savings accounts. Checking and savings accounts may require a little bit of simple paperwork, but the whole process is an easy one.
5. Who should I name as beneficiary?
It’s up to you, but here’s our general guideline: If you’re married, name your spouse. If not, name your adult siblings. If you don’t have siblings, name your parents. You should also always name back-up beneficiaries. Note that for your IRA, it’s better to name your spouse than your child because that’ll provide more rollover options. Don’t name underage children as your beneficiaries, since the court will have to appoint someone to manage those accounts for them.
6. Think about how much you love the ones you love.
Once you’ve done this, you can totally forget about it for many long years. In the meantime, feel good that you’re making sure that your loved ones will reap the full benefits of what you have to give.
Revisit your beneficiaries whenever you go through a major life change, like getting married or having kids. Then, you (and your loved ones) are set.