It’s 10 years or less until retirement. Do you know who your beneficiaries are?
Consider this blog a public service announcement for the responsible naming of retirement account beneficiaries. Too often people think their estate planning is done once they’ve drawn up a will. Not so. The names on the accounts are the names that matter.
All the benefits you have earned and accumulated — pension plan, life insurance, 401(k) and IRA account, etc. — can be passed on to a beneficiary after you pass away. A common mistake is naming one or more people once the account is open and then never thinking about it again.
This step should be revisited periodically, and especially when you near retirement, because beneficiary designations override your will. Naming the wrong people or failing to update your documents can create a mess for your heirs, such as the hassle and expense of probate court.
Who Can Be a Beneficiary?
Your beneficiary can be your spouse, your children, a friend or even a charity. You can add or remove names as you like. There is also no limit to number of beneficiaries you name. Just make sure the allocated percentages add up to 100%.
When You Have No Designated Beneficiaries
If you do not name any beneficiaries, your assets will go to probate court. The probate process can be a time-consuming, expensive and stressful experience for your family.
How to Check Your Beneficiaries
As your life progresses, you may want or need to change your beneficiaries. For example, you may get divorced or one of your children may get married and change his or her last name. Even if your wishes change, your assets will be rewarded to the written designation upon your death, no matter how old the information.
Therefore, double check this information every few years and always after major life events.
Your current beneficiary designations should be on file with your bank, broker or account custodian. Make sure your institution has the correct names on file. Your financial adviser may be able to help you located this information. However, you should keep copies of all your beneficiary forms.
So, if you don’t know remember who your beneficiaries are, check them now… before it’s too late.