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Are Your Beneficiaries Correctly Named?Hundreds of names, birthdays, anniversaries, appointments... from day to day, there’s much to remember. If a
number of years have passed since you chose beneficiaries for your insurance or
retirement plans, there’s a chance you have forgotten to update them as
needed.1 Marriage, divorce, birth, death, or other changes can prompt
the need to revise your beneficiary designations.
If your
spouse is your primary beneficiary, pay close attention to any secondary
designations. If your spouse predeceases you and no secondary beneficiary is
named, the institution might be forced to cash out accounts and add them to your
estate — which could trigger a costly combination of estate and income taxes. Keeping
beneficiary designations current can also help simplify life for surviving
family members. For example, if you name your first two children as contingent
beneficiaries but forget to add a third child from a later marriage, it may
create complications later that your heirs are not prepared to handle. Retirement accounts could grow to become one of your largest assets, so you might want to add a “beneficiary review” to your list of things to remember. 1) Distributions from traditional IRAs and most employer-sponsored retirement plans are taxed as ordinary income and, if taken prior to age 591/2, may be subject to an additional 10 percent federal tax penalty. © 2002 Emerald Publications |
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Even
if you have been diligent about updating your will, trusts, and other important
elements of your estate plan, remember also to make thoughtful and deliberate
beneficiary designations — and to review them periodically. Life insurance and
retirement plan beneficiaries take precedence over instructions in a will.