Although life’s only certainties may be death and taxes, we rarely enjoy planning for them. But without planning, your assets can go to unintended recipients – including the government.
Naming your beneficiaries is only the first step. It’s just as important to periodically review the beneficiaries designated by your will, insurance policies, investment accounts, retirement plans, and similar documents. Examine each document carefully, because some assets may pass to the beneficiaries named in the governing document, regardless of the terms of your will.
Example: You name your husband as sole beneficiary in your will, on your life insurance policy, and in your 401(k) plan. After a few years, you divorce and remarry. You remove your ex-husband from your will and name your new husband as the insurance beneficiary, but you forget about the 401(k) plan. The result: When you die, your ex-husband probably will inherit the plan assets.
Events that might require changing beneficiaries include marriage, birth, divorce, death (e.g., of a beneficiary), increases or decreases in your wealth, changes in tax law, or simple changes of heart. Even in the absence of a triggering event, it’s wise to review your designations regularly. A beneficiary may have fallen out of favor. A once-needy beneficiary may have become wealthy, enabling you to divert your assets elsewhere. Ongoing changes to estate tax law may mandate different approaches to beneficiary selection.
When reviewing your beneficiary designations, start by listing the relevant documents. In addition to your will, personal life insurance, and active retirement plan, include employer-provided life insurance and life insurance associated with services such as credit cards, medical plans, and trade associations. You’ll also need to look at stock purchase plans, stock option plans, and similar benefit programs.
If you haven’t reviewed your beneficiary designations lately, think about doing it soon. For assistance in your review, give us a call.