MAKE SURE YOU KEEP A COPY OF WHAT YOUR BENEFICIARY DESIGNATIONS ARE FOR EVERY ACCOUNT – AND THAT THEY SAY WHAT YOU WANT THEM TO SAY.
They can’t be changed once you die.
Beneficiary Designations confuse many people. So, you are not alone if you don’t understand how they work.
The institution that holds your account (such as Fidelity) has a form (often online) to allow you to name to whom you wish your 401(k), IRA, brokerage account, or life insurance to go to after you pass away without involvement from a Court.
Filling out the form and keeping a copy that you have done so saves thousands of dollars in Probate fees and months of time – as well as protecting your privacy by not having a public record of the value of the gift.
If you are single you can name either a person or a Trust as Primary Beneficiary.
Do not leave the beneficiary designation form blank or name your Estate because doing so forces your heirs into Probate if the asset is over $100,000.
If you are married, you cannot validly name anyone other than your spouse as Primary Beneficiary without the written consent of your spouse. Ask for the consent or waiver form from the institution that holds your account.
Here is an example of a waiver form.
Below is a sample of what to enter into the online form:
Name of Trust: SMITH FAMILY REVOCABLE LIVING TRUST
Date of Trust: 01/27/2021 (This is the date you signed the Trust – The birthday of the Trust)
Your Spouse is the Primary Beneficiary. Enter your Spouse’s SSN when naming your spouse as Primary Beneficiary.
The Trust is the Contingent Beneficiary (or your kids if they are old enough). Enter your SSN and the date you signed the Trust when naming the Trust as Contingent Beneficiary. Enter your kid’s SSN and date of birth when naming directly.
Clients have asked whether the Trust name is unique. No, it is not. What is unique is the match among the account number, the birthday of the Trust, the SSN and birthday of the owner of the account, and the SSN and birthday of the beneficiary. It is the matching of the numbers to the names of the Trust, account owner and beneficiary that produces the unique transaction between yourself and your beneficiaries.
Here is a sample of my Beneficiary Designations from Fidelity. I have three accounts, so there are three (3) different Beneficiary Designations. You do not have to name the same beneficiaries for each account.
Beneficiary Designations become irrevocable at death and cannot be changed by a Judge no matter how unfair the result.
This became such a serious issue with people forgetting to remove their x-spouse as Primary Beneficiary after divorce that the Legislature enacted a Statute (RCW 11.07.010) that voids the gift to the the x-spouse upon entry of the Divorce Decree.
What was happening was a situation in which an elderly person with two ($2,000,000) million dollars in a 401(k) and two adult kids disinherited the kids because 35 years ago that person forgot to remove the x-spouse as Primary Beneficiary. When the kids went to Court, the Judge agreed that it wasn’t fair that their step-parent got two ($2,000,000) million dollars and they got nothing, but the Judge did not have the discretion to change the irrevocable Beneficiary Designation.
I had a case that I told the clients they would lose, but they wanted me to argue it nonetheless. Their father told them he was going to change the Beneficiary Designation to include all of the adult kids. The father requested the form and filled it out, but didn’t mail it in before dying of a heart attack. The Judge agreed that the intent of the father was clear and the result unfair, but the Judge did not have the authority to invalidate an irrevocable beneficiary designation.