Note: I’m not a lawyer, and this is not legal advice, just what I’ve learned, so it’d be wise to consult an attorney about your estate planning needs.

We sat down with our financial advisor to make some changes to our accounts recently, and he noted that we hadn’t designated a contingent beneficiary for our investment accounts.

That’s some jargon there, so let’s break it down.

Every investment account, brokerage account, retirement account, and some bank accounts require that beneficiaries be designated when the account is opened.  A beneficiary is the person(s) who would receive the money in that account if you were to die.

It’s vital that you designate beneficiaries for your accounts – most of the time that should be a person and not your estate.  Here’s why:

– Beneficiaries can receive what’s in the accounts immediately (or relatively quickly) upon presenting a certificate of death, without the monies passing through probate.
– Probate is the process of your estate being settled, including the payment of any debts you owe when you die.  Let’s say you owe money when you die and your estate is the beneficiary of those accounts we’re discussing; those accounts would be raided to pay your debts if other monies aren’t available to do it.  It might not get to the people you actually want to have it.

All that being said, when we established our accounts, we just put primary beneficiaries on them, and left off the contingent beneficiaries.  Obviously, Nancy is the primary beneficiary on my accounts, and I am the beneficiary on hers.  We didn’t want to worry about dividing it up among family members for each account, so we just left that off.  What would happen if we both died, would that the accounts would pass into our estate then bed distributed according to our Last Will and Testaments, which contain provisions about the distribution of our estate.

Now that Milly’s here, we need to update our wills, of course, but we also need to update our contingent beneficiaries on all of our accounts.  The contingent beneficiary gets the money in that account if the primary beneficiary has already passed away.

For now, we’re going to put Milly as the contingent beneficiary.  There’s some technicalities about a minor not actually being able to inherit money in North Carolina, but a guardian would be able to work around that with some paperwork.

That’s a patch, until we get our wills updated!  In our updated wills, we hope to establish a trust, in which all of our assets and worldly possessions would go, for her care while she’s a minor and for her benefit as an adult.  Once that is established, we’d make the contingent beneficiary the trust, so all of our accounts would funnel directly into the trust for her care.

Like I said, I’m not an attorney, so don’t take this as law.  The point of this post is to share our experience and to hopefully encourage you to take action on something that could affect your love ones.  I’d encourage you to speak with an attorney about you specific situation, but you can update your beneficiaries all by yourself if you know who you want to give the money to.

So who are the beneficiaries on your accounts?  Is it how you’d want it?  If not, go fix it!