When you created a bank account, an investment account, or bought another kind of financial product, you likely filled out many forms. One of these forms concerned beneficiary designations.
Simply put, and as the name suggests, a beneficiary designation form gives you the opportunity to officially choose the person who will receive your account’s funds after you pass away.
Although this concept is straightforward, it is important to discuss it within an estate planning context. Specifically, how do financial accounts transfer compared to other assets such as a house?
Typically, a financial account (with proper beneficiary designations) will transfer directly to the beneficiaries after they provide a death certificate and identity information. It will not need to pass via a Will or through a probate procedure. Also, unless you otherwise planned for your financial account to be held by a Trust, it will not need to pass via a Trust either.
That simple transfer procedure is the beauty of financial accounts with proper beneficiary designations. Cheap and quick.
What if you neglected to designate beneficiaries?
In that case, your account would likely have to be distributed through via a Will and a probate process. (Fortunately, probate in Texas is efficient and inexpensive, especially compared to other states.) For many estates, a probate will be necessary anyway to settle any outstanding debts and distribute other kinds of property such as cars and houses. If so, then transferring financial accounts through probate will still be quite easy. It will just require a different legal procedure. If you did not have a Will, though, probate would be much more expensive.
Regardless of your estate plan strategy, you should make sure that your beneficiary designations are in place and updated, and that they reflect your wishes.