- August 26, 2022
- Posted by General Electric Credit Union
- 5 read
7 Surprising Facts About Account Beneficiaries
You can name a beneficiary or multiple beneficiaries on many accounts, including:
|• Individual Retirement Accounts (IRA)
• Life insurance policies
• Checking accounts
• Money market accounts (MMA)
|• Savings accounts
• Health savings accounts (HSA)
• Mutual funds
In doing so, you are designating where you want your balance to go in the event of your passing. Use the information below to gain a better understanding of who you can name and how you can ensure your wishes are satisfied.
Must-have facts about account beneficiaries
1. They trump wills and trusts
Say you set up an account with your spouse as the beneficiary but get a divorce later in life. If you never update your beneficiary and the unexpected happens, your account balance will get transferred to your former spouse – even if your will or trust states otherwise. That’s why it’s crucial to review your beneficiary and confirm the person(s) listed is still the intended recipient.
2. They help your loved ones avoid probate
The term probate describes a court procedure used to administer the estate of a deceased individual. During probate, their assets are distributed, and credits are paid. This process can be both expensive and time-consuming, which is why many people do what they can to help their loved ones avoid it. One way you can help achieve this is by naming beneficiaries on any relevant accounts. Check with your financial institution if you have an existing account and are unsure if you named beneficiaries when you opened it.
3. They can be updated whenever
In most cases, you can update your beneficiary information whenever you want, but a good rule of thumb is to review it on an annual basis. In doing so, you can catch information like home addresses that have changed, or entire persons that you want to add or remove. As well, life events such as the birth of a child or a divorce may also prompt you to check in on your accounts.
4. They can include organizations
Do you have a charity or other organization you feel passionate about? Whether it’s an animal rescue or an organization dedicated to cancer research, you can support them monetarily after your passing by naming them as a primary beneficiary on an account. Or, you can name the organization as a contingent beneficiary. This essentially makes them one of your “back up” options if your primary beneficiaries pass before you. Charities are tax-exempt entities, so they won’t have to pay any income tax on the balance.
5. They may receive funds based on a percentage
IRA accountholders have the option to change the distribution percentages for multiple beneficiaries. For example, you could name both your child and a charity as beneficiaries on an IRA but designate 75% of funds to your child and 25% to the charity. Non-IRA accounts don’t have as much flexibility. For these, funds are distributed evenly among all the beneficiaries.
6. They can be minors
In Ohio, Indiana, and Kentucky, a “minor” is defined as a person under the age of 18. Once an individual turns 18 years old in these states, they are at the “age of majority.” This is important to note because any minor beneficiaries listed on your accounts must reach the age of majority before they can access the funds designated to them. Prior to that, a guardian appointed by you or probate court will manage the asset.
Though the Setting Every Community Up for Retirement Enhancement (SECURE) Act requires your account balance to be distributed within 10 years of your passing, there is an exception for surviving spouses and minor children.1 The 10-year rule will go into effect once the surviving child reaches the age of majority.
7. They aren’t automatically applied across accounts
Say you open an IRA at a financial institution where you already have a certificate. Any beneficiaries listed on your certificate won’t automatically translate over to your newly opened IRA. As well, updating one account in the future won’t trigger an update for others. Review the beneficiaries listed on each of your relevant accounts individually to avoid hiccups.
While assigning beneficiaries on an account is not legally required, doing so is advantageous. At General Electric Credit Union (GECU) we want to set you and your loved ones up for success by Improving the Quality of Your Financial Life. That’s why we offer a range of deposit accounts from money markets and high-yield checking to IRAs and certificates. Our team of experts are available to review your needs and the options and opportunities available to you. We’ll help you update your beneficiaries list so you can feel secure knowing your hard-earned money goes to the right person(s). Conveniently set up an in-branch appointment online and get the ball rolling.