Explain beneficiary vs. co-owner, and why I should care?

March 19, 2006 7:59 AM

What is the difference between a beneficiary and a co-owner in terms of life insurance stocks?

An agent from my life insurance company (someone I've never heard of before) has informed me that I have 50 shares of stocks in MetLife. According to him, I have to designate either a beneficiary or a co-owner for these, and I have to do this in his office. He's called several times, as if this is an urgent matter that must be handled immediately.

First of all, what's the difference between these two options, and is one a better choice? If I die, don't these become part of my estate that my husband would get anyway? Aren't any assets currently listed in my name only really joint assets anyway? (We live in Illinois, have been married 11 years and don't have wills, if any of that makes a difference.)

Secondly, is he just trying to make me come in to the office so that he can try to sell me [whatever he wants to sell me]? The urgency of his request sounds fishy to me. What's the difference to him if I come in next week or next year or never? It's not like we have an agent/client relationship he needs to nurture.

In your reply, please use short words and assume I am stupid, because money matters make my head hurt.

posted by SuperSquirrel to Work & Money (4 answers total)

IANAL, but I've learned a few things about probate in the last year, as executor of my parent's estates. Generally, if you are the sole owner of something, and precede your husband in death without a written will, he can only come in to possession of that thing, by operation of the laws of the state for intestate persons (person dying without a will). Your estate will have to be probated according to those laws, and you don't want that. So, at a minimum, you should make your husband co-owner of these shares, and any or all other accounts you have, if you expect your worldly goods to go to your husband in the event of your death before his.

If you have no children, or other heirs except your husband, and both you and your husband want whichever spouse survives the other to have everything both you own, then making both of you co-owners of everything you have together may be sufficient, as generally, surviving spouses get full control of jointly owned assets without tax penalty or probate delay. But you should check this with a lawyer, at least, and IMO, it would be better if both you and your husband had at least simple wills, and advance medical directives, in case you forget some things like this. If your affairs are not complicated, the cost for both of you to have wills, advanced directives, and other final papers you may need can be as little as a few hundred dollars; whoever survives the other will definitely appreciate having these when the time comes.
posted by paulsc at 8:38 AM on March 19, 2006

It's my understanding that a beneficiary is "payable on death" and revocable at any time - in other words, you can change beneficiaries at your own discretion. A co-owner's rights would not be revocable without consent from the co-owner.

This article may help on beneficiary types may help.

You should choose one of these options, or on your death, the disposition of assets will be subject to your state's laws in the matter, and may be delayed or unecessarily taxed. This article on beneficiaries is a pretty good one. It explains what a beneficiary is, why you need one, and a few dos and dont's.
posted by madamjujujive at 8:58 AM on March 19, 2006

Just to clarify, I said "payable on death" but in the case of stocks (as opposed to benefits from life insurance, for example) having a beneficiary would mean that these stocks were transferrable on death.
posted by madamjujujive at 9:35 AM on March 19, 2006

I might be wrong, but, upon your death, if your husband is beneficiary, the stocks pass to him but are taxed at your rate. If your husband is the co-owner, half would be taxed at your rate upon your death. In that case, your husband would also be liable for any capital gains he accrues as co-owner. This is not the distinction between beneficiary and co-owner, but it might affect your estate planning.
posted by acoutu at 9:39 AM on March 19, 2006