Estate Planning and Investment Advice Raleigh NC

Have You Reviewed Your Beneficiary Designations Recently?

In Asset Allocation, Estate Planning, General Financial Planning, Retirement Planning by Chip Hymiller

Sometimes, people can spend too much energy worrying about things that are outside of their control.  Stock market volatility, the price of oil, interest rates, the economy and even politics come to mind.

Instead of worrying about uncontrollable and unsolvable issues, why not focus your efforts on one of the easiest and most solvable financial “problems” around—incorrect (or non-existent) beneficiary designations.

We suggest you review the beneficiaries of the following:

  • 401(k) Plans
  • IRAs
  • Roth IRAs
  • Life Insurance Policies (including those offered through employers)
  • Pension Plans
  • Deferred Compensation Plans

Having proper beneficiary designations is so important and one financial item that I would strongly encourage you to worry about!  Having improper, or inappropriate beneficiaries can create serious problems. Consider the following:

  • 401(k) plans or IRAs in which no beneficiary is named, could create a major tax headache for the ultimate heirs of these accounts.  Whereas, if they had been directly listed as a beneficiary, they could have continued to defer the taxation of these accounts throughout their lifetime.
  • Life insurance policies with no (or incorrect) beneficiary designations, could be left directly to minors, or young adults, who may not be financially savvy enough to handle large sums of money.
  • For divorcees, pension plans and other qualified retirement plans could go to an ex-spouse, if you do not make a beneficiary change after your divorce.

In our office, we make it a priority to systematically confirm our client’s beneficiary designations at least every two years, or when we know there has been a change in the family dynamic (birth, death, etc.).  It is also important to occasionally review beneficiary designations in the context of your entire estate plan, which would include wills, trusts and other important documents.

If you have any questions, or would like to discuss your beneficiary designations, please do not hesitate to give us a call.