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WalletPrep worksheet · Protect yourself

How to name a beneficiary on your accounts

Name ____________________ Date __________

Key ideas

  1. The beneficiary form usually overrides your will. Life insurance, retirement plans and payable on death or transfer on death accounts go to whoever is on the form.
  2. Always name a backup. A contingent beneficiary gets the money if your primary beneficiary dies before you. Without one, it may go through probate.
  3. Update after every big change. Marriage, divorce, a new child or a death in the family won't change the form by itself. You have to.

Vocabulary

Contingent beneficiary
The backup person who receives an account or policy if the primary beneficiary has died before you.
Beneficiary
The person or group you name to receive an account, a trust or an insurance payout when you die.
401(k)
A retirement savings plan offered through an employer. Money comes straight from your paycheck, often with an employer match.
Probate
The court process that confirms a will, pays an estate's debts and hands out what is left to the heirs.
Payable on death
A beneficiary added to a bank account (payable on death) or investment account (transfer on death) so it passes straight to that person when you die.
IRA
Individual retirement account: a tax-advantaged retirement account you open yourself at a bank or brokerage, separate from your job.

Work it out

Alex, 34, has a will leaving everything to his partner. He adds up his accounts to see how much his beneficiary forms control instead.

  1. 401(k)
  2. Life insurance from work
  3. Savings with a POD beneficiary
  4. Passes by beneficiary form
  5. Checking, no beneficiary
  6. Everything

Check yourself

  1. Your will leaves everything to your partner, but your 401(k) form names your brother. Who generally gets the 401(k)?

    • A. Your partner
    • B. Your brother
    • C. They split it
    • D. The court decides

  2. What does a contingent beneficiary do?

    • A. Gets the money if the primary beneficiary has died
    • B. Shares the money with the primary beneficiary
    • C. Manages the account while you are alive
    • D. Pays your debts first

  3. You have a $40,000 IRA and name two children at 50% each. How much does each one get?

    • A. $10,000
    • B. $40,000
    • C. $80,000
    • D. $20,000

Your turn

List every retirement account, life insurance policy and bank account you have. Log in to each one, check the beneficiary section, and add or fix a primary and a contingent beneficiary with shares that add up to 100%.

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Answer key

How to name a beneficiary on your accounts

Work it out

  1. 401(k)$48,000
  2. Life insurance from work$70,000
  3. Savings with a POD beneficiary$6,000
  4. Passes by beneficiary form= $124,000
  5. Checking, no beneficiary$2,000
  6. Everything= $126,000
  1. $48,000 + $70,000 + $6,000 = $124,000 goes to whoever is named on the forms. Only the $2,000 in checking follows his will.
  2. $124,000 ÷ $126,000 is about 98%. Alex finds that his work life policy still names his sister from before he met his partner.
  3. He updates the 401(k) and the policy to name his partner as primary and his sister as contingent, and adds a POD beneficiary to checking.

Check yourself

  1. B. Your brother The beneficiary form generally controls a retirement plan, no matter what the will says. If you are married, spousal rules can also apply.
  2. A. Gets the money if the primary beneficiary has died The contingent beneficiary is the backup. They receive the money only if the primary beneficiary isn't alive.
  3. D. $20,000 $40,000 × 50% = $20,000 each. The shares on the form must add up to 100%.