5 Ways You Can Fill Out a Beneficiary Designation Form (and Who You Can Nominate!)

You have heard the common estate planner saying, “make sure your beneficiary designation forms are filled out!” Yet, one of the most critical and often overlooked aspects of the estate planning process is properly filling out a beneficiary designation form after creating an estate plan. Beneficiary designation forms are filled out for retirement accounts like 401(k)s, IRAs, and even pensions that have an at-death beneficiary transfer.

The beneficiary designation form is a crucial document, as it indicates who will receive that particular asset once an individual passes away. The beneficiary designation form will override what is written in the individual’s trust or will for this particular asset, and if one is not completed, the individual risks their estate going through probate to be able to access and distribute the funds in that particular account. This is why it is essential to properly fill out the beneficiary designation form.

As always, it is best to discuss with your estate planning attorney which situation best fits your needs. Here are 5 ways an individual can fill out their beneficiary designation form on their retirement accounts:

1. Name an Individual (Primary Beneficiary and Contingent Beneficiary)

Best for: naming a spouse, children, or other loved ones

The most common way to fill out a beneficiary designation form is to name a single person, such as a spouse, as the primary beneficiary. In certain circumstances, it would make sense for an individual to also name a “backup” beneficiary, called a contingent beneficiary, who will receive the funds if the primary beneficiary has also passed away. This could be listed as follows:

• Primary Beneficiary – Spouse (100%)
• Contingent Beneficiary – Child (100%)

It is important to note that the contingent beneficiary will not receive anything unless the primary beneficiary has passed away.

2. Divide Among Multiple Individuals

Best for: naming multiple children as primary beneficiaries, naming multiple family members

Another common way individuals fill out their beneficiary designation form is to name multiple people as their primary (and contingent) beneficiaries. This approach is useful if an individual wants to provide for more than one person. The beneficiary designation form will designate a certain percentage to each beneficiary. For example:

• Primary Beneficiary – child #1 (50%) and child #2 (50%)

It is important to discuss with your estate planning attorney and financial institution how you would want a share to be distributed if that beneficiary has passed away.

3. Name Your Trust as the Beneficiary

Best for: minor children, beneficiaries with special needs, or if an individual wants to control the distribution of the assets (i.e. if they are to be held “in trust” for the beneficiary)

Naming a trust as the beneficiary can provide more control over the funds and how they are distributed. This is essential if the beneficiaries are minors, have any type of disability, or are not financially responsible and an individual wants more control over how the funds may be used for the beneficiary. The beneficiary designation form could be filled out as follows:

• Primary Beneficiary – The [LAST NAME] Family Revocable Trust (100%)

It is crucial to discuss with your estate planning attorney and CPA to discuss any tax consequences, if any, and how that could affect your situation.

4. Name a Charity

Best for: individuals who want to donate to a charity, philanthropic individuals, or those with no close living relatives

Naming a charity on a beneficiary designation form is a good idea for someone who wants to leave a legacy or donate to a charitable cause. The benefit of naming a charity is that charities are tax-exempt, meaning that they will face no tax consequences that are usually associated with retirement accounts after someone has passed away. This is also a helpful tool if someone were inclined to donate to a charity, but also want to name their heirs as beneficiaries under their trust or estate plan. An example of how to name a charity is as follows:

• Primary Beneficiary – ABC Nonprofit Organization (100%)

5. Mix and Match!

Best for: individuals who want to incorporate the above principals

An individual who may want to incorporate the above principals can mix and match how they fill out their beneficiary designation forms. A beneficiary designation form can be filled out as follows:

• Primary Beneficiary – spouse (100%)
• Contingent Beneficiary – ABC Nonprofit Organization (50%) and [LAST NAME] Family Revocable Trust (50%)

Properly filling out your beneficiary designation forms ensures that your assets pass directly to your loved ones and other beneficiaries without the unnecessary delays and legal expenses of probate. At Absolute Trust Counsel, we can help you make the right choice to protect your legacy. Contact us today to get started!

[AD] Estate planning addresses many important factors about your future and legacy. Where do you get started if you don’t have an estate plan in place? If you do, how have new laws and life transitions changed? Will your plan still protect you? Regardless, you deserve to have control over your wants, needs, goals, and hopes for the future. We can help you understand your options and, legally, how you will best be protected at all touchpoints. Get started today by scheduling a free discovery call so we can discuss your needs. Visit https://absolutetrustcounsel.com/scheduling/ or call us at (925) 943-2740.