Beneficiary Designations

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Most retirement plans, life insurance policies, annuities and certain other types of accounts allow you to name who will receive the proceeds when you die by filling out a beneficiary designation form. And it is important that you do so. If you don’t properly complete the beneficiary designation form, that account may be subject to probate and end up in the wrong hands.

So what does properly completing a beneficiary designation form mean? First, you should name your primary beneficiary or beneficiaries. You can name one person (or an institution or trust) as sole beneficiary; or you can name more than one beneficiary and specify what percentage of the account each person will receive. You should also name “contingent” or secondary beneficiaries in case your primary beneficiary dies before you. Failure to do so may end up in a probate court and your retirement account may end up in the hands of an unintended person. Keep a copy with your important papers.

Has Anything Changed in Your Life that Warrants a Change to Your Estate Plan?

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As your life changes, your assets change, and the laws change. You may need to revisit your estate planning documents. Conducting a proper review of your estate plan will help identify the potential need to update your plan.

Life transitions: Have any babies been born, loved ones died, people gotten divorced or married? Are you nearing retirement? If so, you may need to revisit your plan.

Changes in assets: Has your net worth gone up or down? Have you invested in any new assets, such as a business, which may subject you to personal liability? If so, your estate plan needs to be updated.

Funding of assets and beneficiary designations: One of the most common mistakes people make is not properly completing the transfer of assets into a trust within their estate plan. Another common error is having beneficiary designations that are inconsistent with the distribution language in the estate plan. I recommend a review of those matters annually.