Naming the beneficiaries of your retirement assets may seem like an obvious task as you plan for the future, yet it is often one of the most overlooked. Failing to properly update your beneficiary forms can compromise the legacy you worked so hard to build.
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Prepared by Andy Ives, CFP®, AIF®
IRA Analyst for Ed Slott and Company
Regardless of whether you open an IRA, participate in a 401(k) plan, buy a life insurance policy, or start a college saving plan for a child, there is a critical detail which should never be overlooked: naming a beneficiary. Typically, the account application will include a space for doing just that. Sometimes a second form may be required when a person wants to change an existing beneficiary.
Despite what appears to be a basic piece of information – “Who is your beneficiary?” – and despite the ease of writing in another person’s name or a charity to inherit assets after the death of the account owner, beneficiary forms are constantly overlooked, lost, or mishandled. Time and again the beneficiary designation section is left blank. Time and again people fail to update their beneficiary forms after a major life event.
Did you get married or divorced? You should review your beneficiary forms for a possible update. Did your spouse predecease you? Review your beneficiary forms. Are your children now grown and mature enough to handle money? Did someone develop an addiction problem and can no longer be trusted with money? Did a beneficiary reveal himself to be unworthy of your assets? Did you identify a charity that you want to support? Review your beneficiary forms.
Also, do not assume a beneficiary form is on file at the bank or with the custodian that handles your account. While most institutions do their best to maintain accurate records, forms occasionally get lost. Ultimately it is your responsibility to designate a beneficiary, to ensure the designation stays current, and to provide that information to your next of kin.
Copyright © 2021, Ed Slott and Company, LLC Reprinted from The Slott Report, August 11, 2021, with permission. https://www.irahelp.com/slottreport/clarifying-some-roth-conversion-misconceptions Ed Slott and Company, LLC takes no responsibility for the current accuracy of this article.