The Heightened Importance of Beneficiary Naming

Four steps same-sex couples should take to help ensure your intentions are protected

Article Provided by Kevin J. Smith, CFP®, Wells Fargo Advisors 

No one enjoys thinking about the day when they or a loved one will pass away. But if you care how your estate will be dispersed after you’re gone, it’s a topic you need to consider. And for same-sex couples, it can be more complex than for others.

Fortunately, there’s a way to ensure that your intentions to leave your assets to your partner are protected — regardless of where you live or your relationship status:

Clearly name your beneficiary.

How to take action

If you’re concerned about your account beneficiaries, the following are a few steps you can take for increased peace of mind.

#1) Talk to your bank about making your accounts pay-on-death (POD).

You can choose to make any banking account — typically checking, savings, and certificates of deposits (CDs) — a POD account. This step ensures that the only person to receive the assets from your accounts after your death is the person you name as the POD beneficiary. It’s a straightforward process that involves completing a bank-provided form. Usually, there are no fees for this and no limitations on the amount of money that can be designated POD.2 

#2) Contact your Financial Advisor about transfer-on-death (TOD) securities registration.

Nearly every state has adopted a law based on the federal Uniform Transfer-on-Death Securities Registration Act. Like the POD process, this allows you to name the person you want to inherit your brokerage accounts, stocks, and bonds.3

Your Financial Advisor can guide you through TOD registration. Then, be sure to regularly review your beneficiaries to determine if changes are needed. That review is especially important since TOD or POD beneficiaries trump any distribution that might be listed in a will, according to Deborah Lauer, Wells Fargo Advisors vice president, wealth planning strategist,  and certified financial planner™ practitioner. 

Lauer also cautions that the TOD option may not always be the right strategy. “This option should be addressed with your estate planning attorney, who can discuss your goals, net worth, types of assets, and specific beneficiary needs,” she says. “And it’s always important to coordinate estate planning documents, asset titling, and beneficiary designations.”

#3) Check your retirement accounts.

When you first opened your retirement accounts, such as a 401(k) or IRA, you probably completed a beneficiary designation form. However, this step can be overlooked, particularly during account transfers between employers. So it’s essential to review all paperwork to make sure it’s complete. If you need to make a change, you’ll need to notify the account administrator in writing.

It’s also a good idea to stay abreast of changing beneficiary designation rules. For instance, the 2013 Windsor decision changed how qualified retirement plans must treat legally married same-sex couples. Now, if one partner in the marriage wants to leave a 401(k) or pension to a non-spouse beneficiary, such as a child from a previous marriage, the current spouse must provide written consent.

#4) Reach out to experts.

Inheritance rights can be a complex issue. That’s why it’s a good idea to reach out to financial professionals who have studied the nuances. An excellent resource is our company’s team of Financial Advisors. They were the first in the industry to be trained and certified through the Accredited Domestic Partnership AdvisorSM (ADPA®) program. Visit wellsfargoadvisors.com/adpa for more information.

Sidebar

Naming matters

To further safeguard your interests, it’s also important to:

  • Create a written will, which legally defines who should inherit your property and other assets that do not have beneficiary designations.1

More information: Wells Fargo LGBT Estate Planning Guide https://www.wellsfargoadvisors.com/lgbt-estateguide/insurance.htm

  • Execute durable powers of attorney for financial matters and healthcare decisions. These documents give whomever you choose the legal power to act in your place for financial and healthcare issues should you become unable to — especially critical if you are not legally married.2 You should also consider executing a living will, outlining your wishes for life-sustaining medical treatments.

More information: American Bar Association and Caring Connections, a program of the National Hospice and Palliative Care Organization.

Our firm does not offer legal or tax advice.

 

  1. Inheritance Law and the Evolving Family, by Ralph C. Brashier, Temple University Press, published January 2004
  2. “Pros and Cons of Payable on Death Accounts,” by Adam Vukovic, LegalMatch.com, last modified Dec. 9, 2014, http://www.legalmatch.com/law-library/article/pros-and-cons-of-payable-on-death-accounts.html#sthash.V7fRc8yX.dpuf, accessed May 13, 2015
  3. A Legal Guide for Lesbian & Gay Couples, by Denis Clifford, Emily Doskow and Frederick Hertz, NOLO Publications, June 2014, 17th Edition

This article was written by/for Wells Fargo Advisors and provided courtesy of Kevin J. Smith, CFP® Financial Advisor First Vice President - Investment Officer in Green Bay at 920-468-9227

Investments in securities and insurance products are: NOT FDIC-INSURED/NOT BANK-GUARANTEED/MAY LOSE VALUE

Wells Fargo Advisors is a trade name used by Wells Fargo Clearing Services, LLC, Member SIPC, a registered broker-dealer and non-bank affiliate of Wells Fargo & Company.

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