What Happens When You Die?

Summary

Don’t let your investment accounts be an additional source of stress for you loved ones when you die. Most retirement accounts and investment accounts allow you to designate people or charities to receive your assets in the event of your death. No one wants to think about their own death, but for the sake of your loved ones, take a few minutes to make sure your beneficiaries are set correctly!

Importance

If you don’t properly say who you want to receive your investment accounts when you die it can get really messy for your loved ones. The funds can get locked up in probate for a long time, and without a will the government and courts can end up dictating who receives your funds.

Perhaps you set up your accounts years ago and declared who you want the assets to go to, but have you checked to see if those match your current wishes. Sometimes accounts are set up before people get married or loved ones pass away. So avoid the chaos and keep your beneficiaries up to date with your wishes.

Key Terms

  • Primary Beneficiary: A primary beneficiary is simply the first set of options you want to receive your funds. You can have multiple people as primary beneficiaries. For example, if you have three kids and want them each to get a third of your assets you can list them each as primary beneficiaries with 1/3 or 33.3% share.
  • Contingent Beneficiary: Unlike a primary beneficiary, contingent beneficiaries only get assets if one or more of the primary beneficiaries has already passed away. Using the example from above, the grandchildren could be listed as contingent beneficiaries, meaning that if the children have passed away the grandchildren get the money.
  • Individual: Any individual can be listed as a beneficiary. However, some states have regulations requiring the spouse to be listed if they haven’t resigned their rights.
  • Legal Entity: A beneficiary can be a legal entity like a church or charity.
  • Predeceases Method: Building on the example above, imagine one of the children had passed away. Should that child’s 1/3 of the assets be split among its siblings (pro rat) or should it go to the contingent beneficiaries such as the grand children.

How To Update Beneficiaries At IBKR

To update your beneficiaries at IBKR you will have to make the changes for each account number. This allows you to customize things further. For example, you could pass your Roth which is tax free to your children but pass your taxable account to a charity to optimize the taxes rather then sending some of both account to each group. Use the images below to navigate to where you can make changes.

If an account at IBKR is an individual account (taxable or retirement) you can establish beneficiaries online. With jointly held accounts there is no option to establish a beneficiary. If one owner passes it goes to the other automatically. If you want to clarify what you want to happen should both owners die simultaneously, a will would be needed. 

If you have questions reach out to Tines Capital.