Beneficiaries 101
Curtis has earned the Life and Health Insurance licensure, has passed the Series 66 examination, and has earned a degree from the University of Nevada, Reno. He has over 20 years of experience in the financial industry, helping others protect, grow and manage their wealth. Curtis helps clients create customized strategies for their portfolios based on their unique financial goals.
BENEFICIARIES 101
One of the most common mistakes we see still today is people not listing their beneficiaries or not specifying how they want their assets to pass when that unfortunate time comes. I am going to take a little time to talk about how to make sure you have your beneficiaries set up correctly. As well as, the importance of having both primary and contingent beneficiaries and why a Trust isn’t always the best choice for a beneficiary on a pre-tax account.
The first step is to make sure that your beneficiaries are complete on your account. Let’s start with a pre-tax account. The account can be anything from an IRA, 403b, 401k, 457 etc. (A beneficiary form is also used for an after-tax Roth IRA account.) It is important that if given the choice you, list your primary and your contingent beneficiary. The primary beneficiary will be the first person who would inherit the said account if you were to pass, the contingent beneficiary is important to have in place if the primary beneficiary were to pre-decease the account owner. For a non-qualified account, this can be accomplished by completing a Transfer on Death form for most accounts.
Remember a beneficiary on an account can be a person, a charity, or almost anything you can think of. A Living Trust can be used as a beneficiary on an account, but I would caution you to make sure the trust is an appropriate pass-through trust otherwise you may be subject to some serious taxable implications! Currently, anything pre-tax that would go through a Trust that is not established would be taxed at the highest tax rate after the first $13,450, and that is not something anyone would want to have happen to their assets.
A beneficiary can be a person, Trust, or charitable organization. If you chose a charitable organization to be your beneficiary, make sure you are using the appropriate accounts to set up to be donated to charity. Remember, a 501c3 does not pay income tax, therefore naming a charity the primary beneficiary of pre-tax assets may make the most sense if you are someone who wants to give to charity upon passing.
I know much of this may seem simple, but time and time again we run across people not knowing if their beneficiaries are set up, who or what those beneficiaries are, and what the taxable implications of an account passing to the beneficiary may be. I recommend everyone take the time to reach out to their Financial Advisor or account custodian and review your beneficiaries even if you know they are in place. Taking a small amount of time to make sure that both your primary and contingent beneficiaries are set up appropriately will save your beneficiaries a ton of time and headache in the future.
Based in Reno, NV, Cornerstone is for individuals and families looking to grow wealth, protect and preserve their life savings, and plan for the distribution of their estate in a tax-efficient manner through a tailored strategy. Schedule a time to discuss your financial goals with us.