If you have any type of financial account, you should have designated a beneficiary to that account at some point. This might be when you set up a 401(k) at a job, start an IRA, or open a bank account. However, the reality is that we often forget who we’ve set up as a beneficiary and don’t bother to check in on it. Because beneficiaries are part of your estate plan and important to understanding what happens to your financial accounts when you are no longer around, you should do a beneficiary check-up. Here are the basics of checking on your financial beneficiaries.
Beneficiaries are part of your estate plan.
Let’s start with the basics: everyone has an estate. For many younger people, considering an estate and an estate plan might seem like it is far off. But whether you own a home or rent, have a 401(k) or an IRA, or are young or old, you have assets that are part of your estate. Something has to happen to those assets when you die, and it is better that you make that decision rather than leaving it up to the courts.
Your beneficiaries can be different from the heirs listed in your will.
One of the most complicated parts of beneficiaries is that they can be different on each of your accounts, and different from the heirs listed in your will. For example, each 401(k), IRA, or life insurance account you have may have a different beneficiary listed. A beneficiary check-up is a process of going through those accounts, finding out the people (or organizations) listed as beneficiaries and deciding if you want them to remain the person who gets access to that account or money after you die. These will supersede whoever is listed as an heir in your will. For example, you may have listed a charitable organization as the beneficiary to an IRA, but have a child listed as your heir in your will. If this is the case, the IRA will still go to the charitable organization.
Doing a beneficiary check-up gives you peace of mind.
Reviewing your beneficiaries will make your estate process easier and lessen the stress for your loved ones when you are gone. Because your beneficiaries and heirs may not be the same, doing this review and making sure that they are either in line with each other or that the beneficiaries are explained in your will and trust gives you peace of mind. It can help you keep your assets out of probate, protect assets from creditors, and allow your beneficiaries to pay less in taxes.
A beneficiary check-up should be a regular occurrence.
Every major life event should also involve a beneficiary check-up. When you move jobs, open a new retirement or life insurance account, get married or divorced, have a child, or experience a loss in the family, you’ve gone through a major life event. After these types of events, you should do a beneficiary review.
In addition to financial planning, we offer beneficiary reviews, trust reviews, estate financial planning, and business succession planning. Contact us today to find out more about these services and how we can help you with your beneficiary check-up and retirement plan beneficiaries.
Securities offered through Registered Representatives of Cambridge Investment Research, Inc., a broker-dealer, member FINRA/SIPC. Advisory services through Cambridge Investment Research Advisors, Inc. a Registered Investment Advisor. Cambridge and Montgomery Financial Partners are not affiliated.
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