Who Is Your Designated Beneficiary

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This is the Truth Network. Welcome to Finishing Wealth, brought to you by CardinalGuide.com, with certified financial planner, Hans Scheil, best-selling author and financial planner, helping families finish well for over 40 years. On Finishing Wealth, we'll examine both biblical and practical knowledge to assist families in finishing wealth, including discussions on managing social security, Medicare, IRAs, long-term care, life insurance, investments, and taxes. Now let's get started with Finishing Wealth. Welcome to Finishing Wealth, certified financial planner, Hans Scheil, and today's show, we're going to put you on the spot. Who is your designated beneficiary?

That's not just who's your beneficiary, but who is your designated beneficiary? So I don't know if you've ever considered this, but recently God showed me this, and I think it's spectacular that essentially I am God's designated beneficiary. In other words, I'm the benefactor of the fact that He literally poured out His wrath.

He did. He poured out His wrath on His own Son that I would be set free from my slavery. Truly, I was set free because I believed that He is God's Son and because I believed that He did die on the cross, and I believe what it said in John 3, that God poured out His wrath on Him like the serpent in the desert. He was lifted up for that very purpose to become sin so that I could take on His righteousness.

So I am in truth His designated beneficiary. And just as a little side bonus for those of you who want to look, in Habakkuk chapter 3 verse 8, there's this spectacular question that the prophet asked, were you mad at the waters? Were you mad at the rivers that you would send your chariot? And he's talking about that God would be mad at the living water. And that living water, as he got mad at it and poured out His wrath, that would be the Red Sea. And so it's like that whole sea of blood that he would paint this picture that the Egyptians that would put his people into slavery would be all drowned in the Red Sea. So are your enemies that would come after your, you know, for you to be a slave to sin, right?

They're all going to die in that unbelievable Red Sea of Jesus's blood. And so we get to be like that, Hans, right? When we designate beneficiaries, we can take what value we have and be able to give it to the people that we love.

Dr. J Oh, yeah. And it goes directly there. I mean, when you purchase life insurance, or if you purchased it years ago and you write down the designated beneficiary, when you die, that money is going to go straight to the beneficiary. There's going to be no lawyers, no accountants. It's what we call avoiding probate. So just to back things up is, I mean, I had a story about Stephen Covey and his seven habits of highly effective people, but it's nothing compared to the story you just told.

But Stephen, in his seven habits, he tells us that one of them is, begin with the end in mind. And that's always stuck with me when I'm selling life insurance to people, that right in the beginning, I'm going to sit down with them and I'm going to ask them, who's going to be the beneficiary of this life insurance? Now, sitting with a husband and wife, it's pretty simple, is the husband's going to leave the wife and the wife's going to leave the husband if they buy two policies. That's a pretty simple thing, but who are the contingent people? Who are the contingent beneficiaries going to be? They're going to be what, by the time you die, the adult children, typically. Or if your spouse, if you're single or your spouse is deceased, then your beneficiaries are going to be your adult children.

And maybe if you don't have them either, it's going to be somebody else, but we're going to begin with the end in mind. So as we go through the process with life insurance, we're going to start with the beneficiary. Who is the designated beneficiary? And what kind of money are they going to need, and for what, when you pass away?

Right, I love the question you asked me when we started this. You said, so Robbie, if I just said, who's your beneficiary? You'd probably say, right, Tammy is, right? But because you say that Tammy is your beneficiary, then you said the second question, who's your designated beneficiary?

Because that's a different situation. Like who is actually his name on the line of not just one kind of thing, right? Because you've got beneficiaries on all sorts of things. Well, I mean, for starters, if you have an IRA or a 401k or money like that, that has a beneficiary on it. If you have a bank account that can have a beneficiary, it's called a TOD or a transfer on death.

A lot of bankers just skip over that. But I would suggest that you go back to your bank accounts and name a beneficiary or name a transfer on death. It doesn't put them on the account. They got nothing on your accounts while you're alive. But when you pass away, then that account goes to them. Right, which comes in extremely handy because you say it doesn't go through probate. Now, as somebody that, five years ago, somebody had said probate to me, I assumed that's what the bass fishermen used on the pro tournament and it was probate. But I found out when my dad died that this probate thing, like, oh my goodness, bank accounts got locked up almost immediately, right? As soon as this word and everything changed immediately, as things went into this probate period where all this had to be decided and the money wouldn't be actually divided until the process was over, which took over a year and two months in my dad's case before some of these funds were distributed. And so being able to avoid probate because there's times that people need access to money, right? You got to get buried. They need a, you know, they might need a casket, you know, whatever the situation may be, right?

Well, absolutely. We try in our financial planning. A lot of people come in and they ask us, do I need a trust? Or they say I want to trust or somebody told me I need a trust.

I went to a seminar. And, you know, maybe, I mean, you might need a trust. But one thing that I like to do for, it doesn't matter who you are or how much money you got, I like to have as much of your assets, as many of your assets, passed by beneficiary and completely avoid probate. So any life insurance policies, they got a beneficiary on them.

Go straight to whoever you name. Any annuities that you have, they got a beneficiary on them. Any bank accounts that you have, they can have a transfer on death. If you have a brokerage account where you're trading and you can name a transfer on death, you can effectively name a beneficiary on that. So you, you know, you start going through the list.

You say, well, what else? You have a retirement account. It goes to a beneficiary and then you can have a contingent beneficiary.

So in case the beneficiary that you name is deceased or your designated beneficiary is deceased, if you name contingent beneficiaries, when that primary beneficiary dies before you do, your contingents become primary. Pretty simple. Do they allow that? And just because I'm ignorant, I don't know. Like on a bank account, can you have a contingent transfer on death? You know, that's a good one. I'm not a banker.

I don't know. I know that's on every retirement account. Right. It's on every annuity. It's on every life insurance policy, all the ones I mess with. And I would think that it's on the transfer on death applies if the, that there'd be a contingent, but what that tells us is we better check it out. And number two is if you have somebody named as the transfer on death, and then they die, go down and name somebody else.

So if the answer to that is no. Point being is you want to still have a will, but we view the will as a pour over document that anything doesn't, that doesn't pass naturally. I mean, you can't do real estate doesn't have a beneficiary on it. So physical goods, jewelry, a tractor, you know, just whatever possessions that you would have, those kinds of things are going to pass by the will. And anything that doesn't have a beneficiary is going to go into your estate and it's going to go through the same trouble as real estate. So we're going to use beneficiaries wherever possible to get the lion's share of the money to go to the beneficiaries and completely avoid the probate process. Now, you know, avoiding probate and using a designated beneficiary, it avoids executors, attorneys, accountants, appraisers, you got to use all of those people. They cost money and they take time before they're going to settle in a state. Now, after you pass away, the people that survive you, they need funds available immediately just for some things that you mentioned earlier.

If you got to go to an attorney to deal with the house on probate, you got to pay the attorney, you go to the funeral home, they want a credit card. Okay. Yeah, they do. Well, sure they do.

They're in business too. And there can be if a person is a married couple, we don't have as big of a liquidity problem if they have joint bank accounts and that type of thing. So the first one of them passes away, but when they die as a single person, now, you know, who's going to pay the bills?

Well, who's going to keep the house up? You still got to pay the bills for the home until we can get it sold. And if that's what we're going to do, or we're going to will it to one of the kids and the other one needs to buy it from the other one. I mean, estates naturally need liquidity and they need differing amounts. And one of the simplest ways to create that is to leave some of the life insurance just for those final expenses to your most trusted beneficiary. Designated beneficiary, because we got to make sure that they're right. And which leads us to the big, huge issue that we got to make sure that that's up to date because you could have designated a beneficiary, you know, two wives ago, you know, I've had that happen. You know, I can say that myself, you know, I could have a designated beneficiary, you know, that was completely different circumstances with children that change and all sorts of things that change that is something need to review normally, right?

I could tell you stories all day long about the wrong person getting the money. So now that we're going to rely on beneficiaries, why don't we get all of them out people that come to us for financial planning, we do exactly that. We go over every single one of these accounts that they're going to have. And a lot of times people try to shut us down. They say, Oh, we redid our wills. And we've taken care of all that.

Oh, really? And what they don't know is that the beneficiaries are going to trump the will. I mean, when there's a beneficiary on a retirement plan, or an IRA, and person dies, they all they need is a death certificate. And they're going to pay that designated beneficiary right off. I mean, it's, that's done a month after the death if you handle things quickly.

Darrell Bock Right, right. So you can see we got a whole lot to talk about with this idea of designated beneficiaries. Because, you know, it's obviously a real opportunity for all of us to avoid all sorts of conflicts. So we got a whole lot more show coming up. We want to remind you, as always, this show is brought to you by cardinalguide.com. It's cardinalguide.com, where you'll find, you know, the Seven of Worries tab.

And one of those worries, clearly, is your state. And so, you know, here, you're going to find all sorts of stuff on the beneficiaries. There's a YouTube video along these lines, as well as the show notes that gives you all sorts of helpful information that's all there. The cardinalguide.com is a way to contact Hans there. And by all means, get his book, The Complete Cardinal Guide to Planning for and Living in Retirement. So we'll be back with more of who is your designated beneficiary.

Stay tuned. Investment Advisory Services offered through Brookstone Capital Management LLC, abbreviated BCM, a registered investment advisor. BCM and Cardinal Advisors are independent of each other.

Insurance products and services are not offered through BCM, but are offered and sold through individually licensed and appointed agents. Cardinal Advisors is not affiliated with or endorsed by the Social Security Administration or any other government agency. Well, welcome back to Finishing Well with Certified Financial Planner, Hans Scheil. Today's show is Who is Your Designated Beneficiary? And boy, there's, you know, as you're explaining to me, Hans, there's a few flies can get in this ointment.

It's something to be careful with, to actually make sure you're current, right? Well, yeah. I mean, the situation that I think of, and I've seen this happen a lot of times, husband and wife both had life insurance, or they both had annuities, which is the same thing at death. I mean, it's just going to be a payout to the beneficiaries, and they named each other as primary beneficiaries, and they named the adult children as the contingents. And then husband passed away five years ago, and they never, they sent in for his life insurance and collected off of it. And the missus got the money, but she never did anything with her beneficiary. And so what she has is a deceased primary beneficiary, and then two contingents, which are living children. And she's thinking she's fine, and she is fine, because when she dies, they're ultimately going to get the money because the primary beneficiary is deceased, and the contingents become the primary, and they're going to get their money. There's one flaw in that whole thing is they're going to have to prove her kids are that he's deceased.

I mean, they're not going to just take their word for it. So the insurance company says we got a deceased insured, and we've got a deceased primary beneficiary. So first we need proof that the primary beneficiary is dead, and you know how you do that. You get a certified copy of the death certificate. That's hard to get for somebody that died seven, eight, ten years ago. Right, right.

It could take a long time. Yeah, and then you might not even get back what you wanted, then you send it to the insurance company. It's not good enough, and your kids are going to, they're ultimately going to get their money. This is going to get settled, but I can tell you a simpler solution is let's just get a change of beneficiary form from the insurance company.

I can get it off their website. So if you're a widow right now, right, an unfortunate widower, right, and you lost your spouse, and you know that, wow, he was or she was the primary beneficiary. I mean, this would be a good time to think about if I change that, you know, it effectively could help, you know, my actual, you know. Well, you don't need a death certificate either to change a beneficiary because it's your policy. It's your annuity, your life insurance, your retirement account. We're just going to go to the custodian. I can do that in a second on the web, and Tom does this all day long is we print off a form or pull it off of there, and we fill it out, and we just make your two adult children the primary beneficiaries, and then maybe we name some new contingents. We don't have to prove anything other than it's you signing it.

We fax it into them or scan it in, mail it in, and now the beneficiary's changed, problem gone. And we do that on everything he was on, the retirement accounts, the annuities, the bank accounts. I mean, you name it, and then the money is just going to go directly to your kids. Or even grandkids, right? Because that's another thing that happens is you, you know, I'm sitting there thinking, wow. So, you know, you've lost your spouse, and then one of your children is gone, but you've got a grandchild and all that stuff.

You know, that all changes, and that's a good idea to get those out and really review them because the whole idea is just, as we've talked about, it's not just who's your beneficiary but who's your designated beneficiaries, probably would be a better way to put it. Sure it is. Now let's talk about per-sterps and per capita. Per what? Per-sterps, or sturpees, people say. Per-sterps. I know that's. So that's a choice.

Being from out west, that's something you have on horses. You put your feet in your per-sterps. Okay. So if there's more than one beneficiary or more than one contingent beneficiary, you name it, you either mark them per-sterps or per capita. Now let me tell you the difference.

All right, because you lost me at the first word. The default is generally per-sterps, okay? S-T-I-R-P-E-S, per-sterps. That's the default.

And what that means is, let's just use an example like I did in the video. Let's say we have a father who names his five children beneficiaries per-sterps. And then when he dies, one of the children has died before him, okay? So you still have five beneficiaries per-sterps, but four of them are living, one of them is deceased. And when it's per-sterps, what that means in Latin is by the branch, is that deceased beneficiary, their children just automatically become the beneficiary.

By the branch, that's very biblical, by the way. Yeah. That's what it means. And on some forms, that's the default. On other forms, you have to elect either per-sterps or per capita. So let me explain the same situation with per capita. So if you mark per capita instead of per-sterps, now the father dies, there's five named beneficiaries, designated beneficiaries, one's already deceased, and it's marked per capita, then only the four living children get paid off, and it just gets split four ways instead of five.

Or the heirs of the deceased beneficiary get nothing. I get it. Okay.

So per-sterps is by branch? I like that. Yeah.

Or the per capita is they just split it up through the living, right? Right. Right.

And it depends whether you want your kids or your grandkids. Now I'm excited. The next time I do a beneficiary form, if I see per-sterps, man, I'm gonna know where that is. So that's really on there. It's on there, or it's just maybe they'll have in the footnotes that if you want something other than per-sterps, you have to write this in.

I mean, it's on there somewhere. So really. And so the per-sterps is usually the default?

Yeah. I mean, and a lot of them, they'll say that, that it's per-sterps. And if you want per capita, you gotta designate it. Some will give you a box to check. And then I have to wonder when I look at some of these, you could have some life insurance agent of years ago or some insurance agent slash financial advisor selling you annuities, and he's just checking things or checking what he likes better than another one, or he has some thing. And I see a number of things checked per capita, and it's just kind of, did they really want that? So when we get out all these beneficiaries, if you have me look at them or another trained I, we can just fix anything that while you're of sound mind and alive, we don't have to send anything special other than the signed form into the company. Right. You don't need the death certificates or anything because you're just changing the designated beneficiaries on each. But again, it's helpful to get them all out because I'll be honest, man. I got life insurance policies.

I have no idea. But I like the per-sterps thing. Now, another thing you can do with beneficiaries is you can give the company social security numbers, current addresses, current phone number. That helps a lot because a lot of old policies, they don't have any of that stuff. And now the insurance company has to hunt down these people because they can't find them, daughters that have been married and change their name.

It gets a little complicated, okay? So we now, we do that when we fill out beneficiaries on new stuff that we sell to people. We get all that stuff or we have them call us back later with that and add it all in so that this is a smooth process. That's the whole idea of the beneficiary is we want it to just, when a person has all this stuff, all their beneficiary designations, we want to just get them the documentation they need, which is usually the certified copy of the death certificate. Some companies will waive that if they can read an obituary and they can have it validated a couple places and they can phone the funeral home.

I mean, there's all, but just assume you're going to need a certified copy of the death certificate. We get that into the company. They're going to pay the claim and they're going to know right where to send it when we've handled when we've handled the policies. So what about if somebody has, you know, a lot of people these days, they have online investment accounts like, you know, that they're trading their own stocks and stuff like that. Would those have beneficiaries on those or transfer on deaths that they can somehow or another need to go look at? Most of these companies will do a docu-sign, okay?

I mean, there's a form. Most of the more modern companies will do where they literally can go in there and they can change their beneficiary designations through an electronic means, okay? Some of them are going to say, now you got to print it out, sign it, send us the original signature. But a lot of them in today's day and time are going to do all this electronically. And we have more problems with the consumer end of that than we do the company end. I mean, in other words, this couple that's changing all their beneficiaries, they don't want to mess with electronic stuff and they don't, you know, so they'd rather just see a piece of paper with a written form handwritten by us. So a lot of times we use paper.

But I can tell you, most of your organizations that you already work with them electronically will let you update beneficiary forms right online. Once again, we've run out of show. We ran out of time before we ran out of show. We want to remind you that this show is brought to you by CardinalGuide.com for the very reason that we're hoping that you can see that we're all about finishing well. And it's a whole lot easier to get all this help just, you know, dial 1-800-HANS as far as I'm concerned.

Just go to CardinalGuide.com and there look up Hans and you can contact him or Tom. Make that easy. Of course, you can always go to the Seven Worries tab where today we're talking about your estate. And you can click on that tab.

You can see the whole YouTube video on that with show notes, all sorts of, you know, cool stuff you can look at on purse derps and stuff that I never heard of them in my life. I'm really excited I got to learn this today. And again, it's all at CardinalGuide.com. And Hans, it's so exciting for me to hear of new clients that you guys have in Kansas and different states. You guys are available everywhere. We are 50 states, the District of Columbia. We're doing a lot of our work on Zoom.

We also have offices in Charlotte, in Greensboro, and our home offices in Durham, Raleigh-Durham Chapel Hill. And we'll be glad to meet you there. We're here to serve. It's awesome. Thank you so much Hans. Thank you.

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Finishing well is designed to provide accurate and authoritative information with regard to the subject covered. Investment advisory services offered through Brookstone Capital Management, LLC, abbreviated BCM, a registered investment advisor. BCM and Cardinal Advisors are independent of each other.

Insurance products and services are not offered through BCM but are offered and sold through individually licensed and appointed agents. Cardinal Advisors is not affiliated with or endorsed by the Social Security Administration or any other government agency. For dozens of free resources, past shows, or to get Han's book, go to cardinalguide.com. If you have a question, comment, or suggestion for future shows, click on the Finishing Well radio show on the website and send us a word. Once again, that's cardinalguide.com. Cardinalguide.com. This is the Truth Network.