Can You Add Yourself as a Beneficiary?

Understanding how assets are transferred after one’s passing is important for future planning. A beneficiary is an individual or entity designated to receive assets or benefits from various financial instruments. These designations ensure wealth is distributed according to specific wishes, bypassing probate court proceedings.

Defining Beneficiary Roles

A beneficiary is a person or entity designated to receive assets or benefits upon the death of the asset owner. This designation applies to financial products like life insurance policies, retirement accounts, and bank or brokerage accounts with transfer-on-death provisions. Designating beneficiaries is a fundamental part of estate planning, ensuring assets are distributed as intended and avoiding probate.

There are two main types of beneficiaries: primary and contingent. The primary beneficiary is the first in line to receive assets after the owner’s death. If the primary beneficiary cannot receive the assets, the contingent beneficiary acts as a backup. Naming both primary and contingent beneficiaries provides a safeguard, ensuring a clear path for asset distribution and preventing potential delays or disputes.

When You Can Be Your Own Beneficiary

For most financial instruments, you cannot name yourself as the death beneficiary of your own account. A death beneficiary receives assets after your passing. For instance, with life insurance policies, the payout occurs upon the insured’s death, so the policyholder cannot be the beneficiary. This applies to retirement accounts or bank and brokerage accounts with transfer-on-death designations. You are the account owner who benefits from assets during your lifetime; a separate beneficiary receives them after your death.

However, an individual can be a beneficiary of their own assets in specific contexts. A primary example is a revocable living trust, where the grantor can name themselves as a beneficiary. The grantor can receive income or principal from the trust assets during their lifetime, maintaining control and benefiting from the assets they placed into the trust. Successor beneficiaries are designated to receive remaining assets after the grantor’s death, often bypassing probate.

Annuities also present a unique situation. While you are the annuitant, a separate beneficiary is designated to receive any remaining value or death benefit upon your passing. The annuitant and the annuity owner can be the same person, but the beneficiary must be distinct from the annuitant to receive the death benefit. This distinction ensures the annuity’s purpose of providing income during life, and then transferring any remaining value, is fulfilled.

Designating and Updating Beneficiaries

The process for designating or changing beneficiaries involves contacting the financial institution, plan administrator, or trust attorney holding the account or managing the trust. Providers offer specific beneficiary designation forms, which may be available online or in paper format. It is important to accurately complete these forms, providing full legal names, dates of birth, and relationships for each designated individual or entity. Providing additional details like Social Security numbers can further streamline the asset transfer process for your beneficiaries.

Regularly reviewing and updating beneficiary designations is a crucial aspect of financial and estate planning. Life events such as marriage, divorce, the birth of a child, or the death of a named beneficiary impact who should receive your assets. Failure to update these designations can lead to unintended consequences, potentially resulting in assets being distributed contrary to your current wishes, or even falling into probate. It is advisable to coordinate beneficiary designations with your overall estate plan, including wills and trusts, as these designations typically supersede instructions in a will for specific accounts.