Posted in Finance, Accounting and Economics Terms, Total Reads: 142
Definition: Designated Beneficiary
Designated beneficiary is a person selected by the owner of a retirement account to inherit the money or assets after the death of the owner. Advantages of designated beneficiary is that the assets of the owner will go in the hands of the right owner and will be used efficiently.
The owner is also free from the tensions of his money after his death. He is insured that the money will go to the people he may deem fit.
1) PERSON SELECTED: - The designated beneficiary can be a person or trust of individuals but cannot be a charity or an estate.
Most of the financial institutions in which these accounts are opened let you decide the person or the trust to whom the assets of the account will belong to after the death of the owner.
There are further two classifications of beneficiaries
Primary beneficiary is the one who will have the first right on the assets of the owner of the account.
Secondary beneficiary is the one who will get the right over the assets in case the first beneficiary is no longer alive.
After naming the names you also need to define the percentage of amount each asset will go to.
2) RETIREMENT ACCOUNT:-A retirement account is an account which let an individual save or deposit money for after working life i.e. retirement period. This account is set up at a financial institution.
These types of accounts provide either tax free growth or a tax on deferred basis.
There are various types of retirement accounts like traditions, Roth or rollover. The accountholder can choose any one which it deems fit for his purpose.
Mr X holds a retirement account with 10000 $. He named his wife Mrs Y as the primary beneficiary and kids K and l. In case of death of Mr X and Mrs Y both K and L will get 50% each of the amounts. Both the kids are secondary beneficiaries.