Now is the time to start creating your estate plan if you have not done so already. Since you never know what will happen, you should be prepared to have everything in place in order to make the administration of your estate as seamless as possible. One of the basic things you will need to understand about estate planning is how to choose your beneficiaries. 

What are beneficiaries? 

A beneficiary, also referred to as an heir, is any individual or organization set to receive direct material benefit of any kind from the distribution of your assets after you have passed away. This can include cash, stocks, real property, or some other type of asset you intend to pass to your beneficiaries. 

Where do you name your intended beneficiaries? 

There are several places in your estate plan where it is appropriate for you to name your preferred beneficiaries. Your wills, trust and life insurance policy will be some of the most important documents that you need to make sure to properly indicate who you want your assets to go to after your death. Making sure the legal language indicating your beneficiaries on these important estate planning documents is done properly is of utmost importance. 

You will also have to make necessary changes to your different accounts to make sure your beneficiaries will receive what is in those accounts. This can include checking, savings, and investment accounts. Also, it is important to list your beneficiaries on your retirement plans and accounts, such as your IRA, 401(k) and 403(b). 

Primary beneficiary 

Individuals and organizations that are first in line to receive assets from the administration of your estate are referred to as primary beneficiaries. Generally, your will or trust will indicate who your primary beneficiaries are. Primary beneficiaries can also be indicated for your various accounts and insurance policies. 

Contingent beneficiary 

If your primary beneficiary ends up dying before you pass away, your asset will go to your contingent beneficiary. As with primary beneficiaries, your contingent beneficiaries can be indicated in your will or trust. 

Choosing the right beneficiaries 

There are a few things to consider when selecting your beneficiaries. Much will depend on the nature of the relationship with the potential beneficiary. Also, this will likely play a significant role in deciding which beneficiary will be given which asset of your estate. 

It might be a good idea to make those who are dependent on you financially a priority when choosing your beneficiaries to your estate. This might include elderly parents, children, a widow, or other family and loved ones who are not able to support themselves. 

One other aspect you should take into consideration is the maturity level of the potential beneficiary. There are some types of assets that may require more life experience and maturity to manage. For instance, giving your small business to your young niece who has little business knowledge and experience may not be the best choice. 

Ultimately, who you decide to receive which asset from your estate is a personal choice and is completely up to you. However, be sure you understand the various dynamics at play when making this decision.


Any opinions are those of the author and not necessarily those of RJFS or Raymond James.  The information has been obtained from sources considered to be reliable, but Raymond James does not guarantee that the foregoing material is accurate or complete.  While we are familiar with the tax provisions of the issues presented herein, as Financial Advisors of RJFS, we are not qualified to render advice on tax or legal matters.  You should discuss tax or legal matters with the appropriate professional.