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Freeman's Blog

March 14, 2013

The beginning of the year is a good time to review your beneficiary designations to make sure they reflect your current wishes.

This is especially important if there have been changes in your life, such as the birth of a child or grandchild, a death in the family, a divorce, or a remarriage. But even if your family situation remains the same, it’s a good idea to review whether you have completed and updated all appropriate beneficiary forms.

heirs to your accountA will is an essential legal document for naming beneficiaries, not only for finances but also for personal items. A trust may also be helpful in some situations. However, the money in most retirement accounts and life insurance policies convey directly to the people named on the beneficiary forms — even if they are different from the people named in your will or a trust — and do not go through the probate process.

Fortunately, it’s fairly easy to designate or change your account beneficiaries. Unlike wills and trusts, which can be expensive to update, you can simply file a new beneficiary designation form with the appropriate insurance company.

Here are some issues to consider as you review your beneficiary designations.

  • Your current spouse must be the beneficiary of an employer-sponsored retirement plan unless he or she waives that right in writing. Without a waiver, this could mean that any children from a previous marriage would not receive any account proceeds.
  • Designate secondary or contingent beneficiaries in the event that the primary beneficiaries predecease you. Otherwise, proceeds would be distributed according to the default method specified in the account documents and/or state law.
  • Some insurance policies, pension plans, and retirement accounts may not pay death benefits to minors. If you want to leave money to young children, you should designate a guardian or a trust as beneficiary.

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Check out my free life guide “Managing an Inheritance“.

Call me 1.866.471.7233 with any questions about your retirement planning strategy. As always, my consultation is free.