What is a Beneficiary?
A beneficiary is a person or entity such as a charity, trust, business, or educational institute who is legally designated to receive funds from a life insurance policy, retirement account, bank account, trust fund and more when the account owner passes away.
Note: At GSCU, beneficiaries must be a person or a trust.
A beneficiary has no ownership rights while the account owners are alive. Beneficiaries generally cannot access the accounts, make withdrawals, or make account changes. When the account owner(s) pass, the funds are usually transferred to the beneficiary without having to go through probate court.
What happens if you don’t have a beneficiary?
Accounts without a beneficiary may have to:
- Go through probate court
- Probate court can be a lengthy or costly process
- The courts may decide how the assets are distributed
- Probate courts are public records, which mean reduced privacy around financial matters
- Family disputes could occur without clearly designating your wishes
Beneficiary Types
Naming a primary beneficiary represents the “first choice” of who will inherit financial assets. Contingent beneficiaries serve as backup in the event the primary beneficiary has passed away or is unable or unwilling to receive the assets. Planning for both helps ensure your wishes are honored in a variety of circumstances.
Contingent beneficiaries are only available on GSCU IRA accounts. However, GSCU permits multiple beneficiaries to be designated for a single account. In such cases, the funds would be allocated equally among all named beneficiaries.
Beneficiaries vs. Joint Owners
Joint ownership occurs when two or more people legally own an asset together, and while all owners are alive. Most joint accounts include “rights of survivorship,” meaning when one owner dies, the surviving owner automatically becomes the sole owner.
The key distinction is joint owners share the asset right now, and a beneficiary only receives the assets after death.
A beneficiary designation is often best when:
- You want to maintain full control during your lifetime
- You want assets transferred efficiently after death
- The account does not need assistance or shared management with transactions such as making withdrawals, drafting checks, or accessing digital banking
- You want cleaner estate planning
- You are naming children or multiple heirs
Joint ownership can be useful when:
- Two people actively share finances
- A spouse or partner needs equal access to household funds
- Someone helps manage day-to-day financial responsibilities
Selecting a Beneficiary
Choosing a beneficiary is a personal process. Here are some steps to guide you:
- Assess your relationship with loved ones and who you trust to manage the assets you leave behind
- Plan a primary and contingent beneficiary (when applicable) in case unforeseen circumstances arise
- Consider consulting a financial advisor to help ensure your beneficiary designations align with your overall estate planning and financial goals
At GSCU, beneficiaries can be added by sharing the person’s name, phone number, and Social Security Number.
Sources: https://www.metlife.com/stories/benefits/beneficiary/