fbpx

When Did You Update Critical Beneficiary Designations?

It’s important to review the beneficiary designations on accounts like life insurance, IRAs and pensions.

There have been many cases of retirement account owners who have been divorced and remarried but failed to update their beneficiary designations.

If you forget, you may find that your designated beneficiary isn’t who you want it to be. That can frequently be the case in the event of a divorce, remarriage or if new children or grandchildren were welcomed into the family since your retirement plan account was started. If you named a charity as your beneficiary years ago, it may no longer exist.

It is good if you are reviewing your estate plan regularly.  However, remember that retirement accounts aren’t part of your estate and aren’t governed by the provisions of your will, so it is important to keep these retirement documents updated.

Retirement account beneficiary designations are often neglected: they don’t get the attention they need!

Failing to update beneficiary designations can be very frustrating for the family. They’re the ones who will need to go to court to get a legal determination of the true beneficiary. The judge’s decision may not be what the deceased would have wished.

There can also be an issue if some children are named as beneficiaries, but the document isn’t updated to include those who were born after the initial designation. That’s why you should update your beneficiary designation right after any change in family status—and review it periodically, so they never are out-of-date or incorrect. You should always have contingent beneficiaries as well.

Another option is to draft customized beneficiary designations to address “what-if” situations.

If you don’t name a beneficiary, the beneficiary may be determined by federal or state law, or by the plan document that governs your retirement accounts. For qualified plans like profit-sharing plans, 401(k)s, and money purchase pension plans, federal regulations automatically designate the spouse of the account owner as the beneficiary. The spouse has to approve of any other designation, and this must be in writing and notarized. If the retirement account owner is single, her estate may be the default beneficiary.

An IRA plan’s documents also provide a default designation, if the designated beneficiary predeceases the IRA owner. The default options vary among IRA custodians and trustees. While the default options rid any administrative responsibilities from account owners, they may not reflect their preferences. As a result, account owners should review the plan document and be certain that they update their beneficiary designations regularly.

Many IRA plan documents have default beneficiary options, so if you designate two people as your beneficiaries and one predeceases you, the share that belonged to the deceased beneficiary automatically goes to the surviving beneficiary. If you have a customized designation, you can instruct how that portion would be distributed, instead of having it default to the surviving beneficiary.

Making a proper beneficiary designation is a crucial component of your estate planning. Be sure to talk to a qualified estate planning attorney about your beneficiary designations.

Reference: Investopedia (2018) “The Importance of Updating Retirement Account Beneficiaries”

Like this article?

Share on facebook
Share on Facebook
Share on twitter
Share on Twitter
Share on linkedin
Share on Linkdin
Share on pinterest
Share on Pinterest

Leave a comment

LIKE THIS POST?

We have a LOT more where that came from!

We hate spam too. We will never share or sell your information.

Call Now ButtonCall Us Now https://jsfiddle.net/7h5246b8/

Request a free consultation

We hate spam too. We will never share or sell your information.

We've been putting together as many resources as possible so that we can continue to help:

  • If you’re a current client with a signing appointment or a prospective client with a consultation and would prefer that meeting take place in your own home, we can accomplish that with a little bit of pre-planning on our part and with the addition of a laptop, smartphone, tablet or other computer in your home to facilitate this virtual meeting. For those of you that need to sign legal documents, that too can be accomplished with the use of a webcam (FaceTime etc.), so that we can witness and electronically notarize all of your important legal documents.
  • We launched the rollout of our on-demand webinar early so that new clients and our allied professionals can view the important component parts of ‘an estate plan that works’ at their convenience.  That is available on our website.
  • Live video workshops will be produced as quickly as possible and certainly ahead of our previous schedule; we will keep you posted as these events become available. Given the ‘boutique’ nature of the firm, we rarely have more than ten people in our office including team members at any one time. During this period of ‘social distancing,’ we promise to have no more than 8 people at any time.   This allows us to comply with the Governor’s directive to limit in-person gatherings.
  • The best way to communicate with us is still by phone during regular office hours of 8:30 to 5:00, Monday through Friday, or, you can email any of our team members (that is, their first name followed by @zarembalaw.com).  We will respond to these emails as quickly as possible.
  • Please continue to follow the directives of our local, state, and federal agencies. For your health and in consideration of our team who is assisting you, if you’ve scheduled an office appointment or planned to drop off paperwork and are experiencing a fever, dry cough, or shortness of breath, please contact your primary care doctor for guidance and then our office to reschedule.

Thank you, Walt and the Zaremba Team

Coronavirus/Covid-19
Update to our Process

The unprecedented coronavirus pandemic has taken our entire country by surprise. We understand how difficult this time is for America’s businesses and families.  However, we believe it is vitally important that we make every effort possible to continue to offer solutions that avoid disrupting our important partnership with you, your family and friends.  As you know, estate planning is not something that should wait for a more convenient time, therefore the opportunity to address your important goals both during and after this crisis should not wait.  To that end, we have added the option of a ‘virtual consultation’ to our office process.  You will now have a choice of either meeting with us in our office or in the comfort of your own home.