Have You Reviewed Your Beneficiary Designations Recently?

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.

There have been many occasions that we discover a serious mistake or oversight when we review our client’s beneficiaries. We normally suggest that you perform a “beneficiary audit” at least every 3 years, or when there are changes in your family dynamic (birth, death, marriage, divorce, etc.). 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 we strongly encourage you to worry about!  Having improper, or inappropriate beneficiaries can create serious problems. Here are few of the more common mistakes that people make:

• Not naming a beneficiary at all.

• Naming an “estate” as beneficiary.

• Naming an ex-husband or ex-wife as beneficiary.

• Listing a parent as beneficiary after getting married and having children.

• Not having a contingent or secondary beneficiary.

• Naming a minor (or even a young adult) directly as a beneficiary instead of a trust for their benefit.

• Designating a trust that does not exist or is outdated as beneficiary.

Reviewing and updating beneficiary designations is a painless and quick exercise that can make a huge difference in creating the most efficient distribution of your assets to heirs. Because there are tax, legal and other logistical issues to consider, it is important that you choose your beneficiary designations strategically and in the context of your entire estate plan.

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