No matter your age, your profession, or your season of life, you’ll want to assess your list of beneficiaries. Relationships and circumstances change, and sometimes, so do your recipients. Here are everyday life events when you want to complete an annual beneficiary review. However, we believe the most compelling reasons are to ensure your accounts distribute as you wish rather than just what you hoped. Keeping your selections updated allows your executor to identify your wishes with less time and effort.

Are Your Beneficiaries Current?

Go through your records and reassess each account or policy. If you can’t locate or are uncertain of your selections, request a copy of the choices. Have your relationships or any other factors changed in your life? Have the circumstances or finances of your beneficiaries changed? Has the value of the account changed significantly over time? Who do you genuinely want to receive the money in these accounts?

Here are some life events that should trigger a review:

    • Marriage/Remarriage/Divorce
    • Birth/Adoption of a child
    • Death of spouse or beneficiary

If you’ve recently married or divorced, it’s time to update your account beneficiaries with the proper spouse you wish to be named. Have you done so yet? If you divorce, consult your attorney to confirm if there are any restrictions via the divorce decree that your former spouse must remain as the beneficiary on specific accounts?

Have you selected children, nieces/nephews, or grandchildren as account beneficiaries? As your family grows through birth or adoption, update designations to recognize the increased headcount. This update becomes essential if the proceeds are equally divided among a group; nobody wants to be left out.

If your spouse or beneficiary passes away, you’ll need to update the recipient on your accounts. Due to their passing, you may no longer have viable selections on record.

Who Can Be a Beneficiary?

Federal law requires 401k and other qualified plan account beneficiaries to be your current spouse. Any alternative selection requires your spouse to consent and sign off on this selection.

We suggest you select primary and secondary beneficiaries for your accounts. Secondary beneficiaries are helpful in the unfortunate case your primary beneficiary passes away before you do. This step keeps your proceeds from slipping into probate by passing funds to the secondary beneficiary.

You can also select non-family members or as multiple recipients if you desire. Doing so allows your funds to go directly and bypass any lengthy probate process. However, you’ll consider whether or not the people you choose can manage these proceeds. If not, speak to an attorney about setting up a trust to help manage the funds. Also, recognize that many insurance companies prohibit any primary beneficiaries under the age of 18.

Be wise and don’t take the “easy way out” by assuming your Will is ironclad. Regardless of your Will, the outcome frequently comes from the policy form upon which your beneficiary is named. If you want someone else to be your designated beneficiary, you’ll need to update these records and not rely on your Will.

Other Things to Keep In Mind

Request the required beneficiary designation forms from the insurance company, retirement plan administrator, or custodian of your investment accounts. Be prepared to provide the following on your selections: name, address, SSN, date of birth, and relation to you. Fully complete all sections of the form, sign and return it as instructed. Keep a copy for your records too, as well as a list of these names and their contact information. Next year, you’ll record your selections, and your executor role will be less stressful. It can be tempting to omit identifying information such as a social security number or a date of birth. Taking this shortcut makes it challenging for the recipient to receive the money, especially if your loved one has a common name.

Consider your recipients’ income streams. If they receive government assistance, collecting a payout could impact their eligibility for benefits. Agencies might reassess their ability to cover daily expenses, reducing or eliminating their benefits. Discuss these concerns with your loved ones and advisor before naming them on any account.

At Organized Instincts, our seasoned team of daily money managers can help you analyze and update your beneficiary list keeping your records current. Don’t leave your loved ones with a mess. Schedule a free consultation today to help give your loved ones much-needed peace of mind.