Beneficiary Designation Vs Will

flik eco finance personal beneficiary designation vs will

Making a will is an important part of estate planning. It ensures that your assets are distributed in the way you want after you die. However, there are other ways to distribute your assets, and one of those is through beneficiary designation.

So, what is the difference between beneficiary designation and will? This personal finance guide will explore both options and help you decide which is right for you!

What is a Beneficiary Designation?

A Beneficiary Designation is a document that designates who will receive your assets upon your death. This can include things like bank accounts, retirement accounts, life insurance policies, and even some investments.

What is a Will?

A will is a legal document that allows you to specify how your assets will be distributed after you die. You can use a will to designate beneficiaries for your property, appoint a guardian for your minor children, and make other important decisions about your estate.

Wills are typically created with the help of an attorney, who can ensure that the document is properly executed and filed with the court.

What is The Difference Between a Beneficiary Designation and a Will?

Most people don’t know the difference between a beneficiary designation and a will. A will is a legal document that says who gets what when you die.

A beneficiary designation is a form you fill out for each asset (life insurance policy, retirement account, etc.) that says who gets that particular asset when you die.

What Are The Different Types of Beneficiary Designation?

There are four types of beneficiary designations:

  • Primary
  • Contingent
  • Tertiary
  • Residuary

The primary beneficiary is the first person named on the account who will receive the money from the account upon the account holder’s death.

The contingent beneficiary is the second person named on the account who will receive the money from the account if the primary beneficiary dies before the account holder.

The tertiary beneficiary is the third person named on the account who will receive the money from the account if both the primary and contingent beneficiaries die before the account holder.

The residuary beneficiary is the person or persons named in a will or trust to receive any property that is not otherwise disposed of by the will or trust.

What Are The Different Types of Will?

There are three different types of will:

  • Testamentary Will
  • Living Will

The first is a testamentary will, which is a will that’s made in anticipation of death.

The second type is a living will, which is a will that’s made during your lifetime. The third type is an irrevocable trust, which is a will that can’t be changed after it’s been made.

What Are The Advantages of a Beneficiary Designation?

There are a few advantages of having a beneficiary designation:

It’s revocable. You can always change your beneficiary designation form if you need to, without having to go through the hassle or expense of changing your will.

It avoids probate. Probate is the legal process of distributing your assets after you die, and can be a long and costly process. If you have a beneficiary designation in place, your assets will go directly to your beneficiaries, avoiding probate altogether.

It’s easy to set up and doesn’t require a lawyer. All you need to do is fill out a beneficiary designation form, which is usually available from the company or institution that holds your assets.

What Are The Advantages of a Will?

There are several advantages of having a will that can work to your benefit.

For one, a will gives you the ability to name an executor, which is the person who will be responsible for carrying out your final wishes. You can also use a will to appoint guardians for any minor children.

Additionally, wills can be used to distribute your assets in a way that you see fit, rather than having the state dictate how your property will be divided.

What Are The Disadvantages of Beneficiary Designation?

There are a few disadvantages to beneficiary designation.

First, if you have a change of heart after you’ve designated someone as your beneficiary, it can be difficult to make changes. You’ll need to contact the company or institution holding your account and fill out the necessary paperwork to make the change.

Another disadvantage is that beneficiary designations can be overridden by a Will. So, if you have a Will that names someone other than your beneficiary designation as the person you want to receive your assets, the Will takes precedence.

Finally, beneficiary designations don’t take into account any special circumstances in your life. For example, if you have young children, you may want to name a guardian for them in your Will. A beneficiary designation can’t do that.

What Are The Disadvantages of Will?

The main disadvantage of a will is that it can be contested. If someone doesn’t agree with the way you’ve distributed your assets, they can file a lawsuit. This could end up costing your estate a lot of money in legal fees.

Another downside to a will is that it can take awhile for your beneficiaries to receive their inheritance. The probate process can be lengthy, and it can be frustrating for your loved ones to have to wait months or even years to get what you’ve left them.

Finally, a will is a public document. This means that anyone can see it, which could be a problem if you’re trying to keep your affairs private.

So, Which One Should You Use?

The answer to this question is, unfortunately, not a simple one. It depends on your unique circumstances and what you want to achieve with your estate planning. However, in general, we recommend using both a will and beneficiary designation forms.

A will gives you the ability to appoint a guardian for your minor children, which is something that you cannot do with a beneficiary designation form. Additionally, a will allows you to leave specific instructions for the distribution of your property, which can be helpful if you have certain sentimental attachments to certain items.

On the other hand, beneficiary designation forms are generally simpler and easier to set up than wills. They also avoid the probate process, which can be lengthy and expensive.

What Are Some Alternatives to Using a Beneficiary Designation or a Will?

If you’re not comfortable with using a beneficiary designation or a will, there are some other options available to you.

You could set up a trust, which would give you more control over how your assets are distributed after your death. You could also simply give your assets to your beneficiaries directly. This might be a good option if you have a small estate and you’re confident that your beneficiaries will use the assets wisely.

Finally, you could donate your assets to charity. This is a good option if you don’t have any close family or friends who you want to benefit from your estate.

What Are Some Tips For Using a Beneficiary Designation?

When you are determining who you want to name as your beneficiary, there are a few things to keep in mind.

First, you will want to make sure that the person or persons you name are people who you trust implicitly and who will use the money in the way that you would want them to. You should also think about naming more than one beneficiary, in case something happens to the first person you name.

Finally, you should keep your beneficiary designation up to date, especially if there are any major changes in your life, such as getting married or having children.

What Are Some Tips For Using a Will?

If you have decided that a will is the best option for you, there are some things to keep in mind when creating one. First, be sure to title the document “Last Will and Testament,” and date it. You will also need to sign the will in front of two witnesses, who must also sign the document.

It is important to be as specific as possible when drafting a will. This means including the full name and address of each beneficiary, as well as what you would like them to receive.

For example, if you have a bank account with $50,000 in it, you would need to list the account number and specify that the beneficiary is to receive the entire amount.

It is also a good idea to name an executor in your will. This is the person who will be responsible for carrying out your final wishes. You should choose someone you trust implicitly, and who is organized and detail-oriented.

Finally, be sure to keep your will in a safe place. Your executor will need to be able to find it easily, so do not hide it away. A safe deposit box at a bank is usually a good option.


About Jermaine Hagan (The Plantsman)

Jermaine Hagan, also known as The Plantsman is the Founder of Flik Eco. Jermaine is the perfect hybrid of personal finance expert and nemophilist. On a mission to make personal finance simple and accessible, Jermaine uses his inside knowledge to help the average Joe, Kwame or Sarah to improve their lives. Before founding Flik Eco, Jermaine managed teams across several large financial companies, including Equifax, Admiral Plc, New Wave Capital & HSBC. He has been featured in several large publications including BBC, The Guardian & The Times.

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