Beneficiary designation: the step everyone should take to protect their loved ones

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The word "estate" might conjure visions of country mansions, but did you know that if you have assets like a house or condo, car and investment and/or bank accounts, you have an estate, too
While it's not always easy to think about what happens to your money when you die, something will happen. But — here's the good news — you can take one easy step that can make a big difference in protecting your loved ones: designating beneficiaries for your banking and investment accounts. Here are some common questions people ask about beneficiary designations.

What are account beneficiaries?

Beneficiaries are one or more individuals or entities (like a business, organization or trust) designated by you to receive the balance of assets in your account when you pass away. For banking accounts they may be called Payable on Death (POD) Beneficiaries and for investments the term Transfer on Death (TOD) may be used. They might also be referred to as 'In Trust For' (ITF), 'As Trustee For' (ATF) or Totten Trust. For life insurance, they may be called primary or contingent beneficiaries. Upon your passing, the funds in the account go to or are held for the designated beneficiaries, bypassing the lengthy probate process in court.

What if I don't designate a beneficiary?

If you don't have a beneficiary named, your accounts may enter probate — a court-supervised process of distributing the estate and assets of a deceased person. Probate — which takes place even if you have a will — can be expensive, emotional and time consuming for your loved ones as court costs and attorney fees are incurred.

Who can be a beneficiary?

Almost anyone, whether residing in the US or internationally, can be a beneficiary. This includes friends and family, but also entities like non-profits, companies, trusts, and other organizations. You'll need to provide specific details about the beneficiary, such as the beneficiary's name, date of birth, country of citizenship, relationship to account holder, and either the beneficiary's Social Security Number (SSN)/ Tax Identification Number (TIN) or complete address. For entities, you'll need the full legal name and either the SSN/TIN or address. If any of this information is missing, the assets may not be distributed as you wish.

How do I designate beneficiaries?

You can designate beneficiaries for a wide range of accounts, including checking, savings, Certificate of Deposit (CD) accounts, Individual Retirement Accounts (IRA), and investment accounts. These accounts can be individual or co-owned personal accounts, and/or sole proprietor small business accounts.

Designate or update your beneficiaries

For your Bank of America accounts, sign in to Online Banking, select the account and then in the 'Features' menu select 'Manage' next to Beneficiaries. You can also visit a financial center if you need assistance.

Can I have multiple beneficiaries?

There's no limit to the number of beneficiaries you can designate on an account. The assets in your account will be divided between the beneficiaries when you pass away.

What's the difference between primary and contingent beneficiaries?

While you can have any number of primary beneficiaries, some accounts and life insurance policies may also allow you to designate contingent beneficiaries. Assets will only pass to contingent beneficiaries if the primary beneficiaries have predeceased you or can't be found.

How often should I update my beneficiaries?

It's essential to regularly review and update your designations. Consider setting a yearly reminder to review your designations, and particularly after significant life events such as a marriage, divorce, or the birth or adoption of a child.
It's never too early — or too late — to take these important steps. By designating beneficiaries for your accounts and keeping these designations current, you can ensure a smoother path for your loved ones in the event of your death.

Further steps to protect your wealth and wishes

Once you've designated beneficiaries for your accounts, consider taking your protection of your assets and family a step further. For more help in understanding your options, you may want to consult with an attorney or tax advisor.

Provide for dependents

Make sure you have at least a basic will that includes provisions for your dependents, such as naming guardians for minors, providing for children from a previous marriage, and specifically addressing the care and income of relatives with special needs.

Appoint an attorney-in-fact

An essential part of your estate planning is appointing an attorney-in-fact under a Power of Attorney (POA), granting another person the authority to make major financial decisions on your behalf.

Create a living will

This legal document provides instructions for your medical care or the termination of medical support in certain circumstances. It is used if you become incapacitated and are unable to communicate your wishes.

Establish a trust

A trust is a versatile planning tool that can be used to hold assets for beneficiaries, offer significant tax benefits, and address complex family situations.

Create a digital estate plan

In today's digital world, it's essential to plan for the management of your digital assets and accounts, including social media accounts, after your death. In addition to making sure your loved ones have log-in information for your important financial accounts, many social media platforms have options to set up contacts and permissions for family members to manage your account in the event of your death.

Next steps

Merrill, its affiliates, and financial advisors do not provide legal, tax, or accounting advice. You should consult your legal and/or tax advisors before making any financial decisions.