We all have to-do lists. Maybe it includes cleaning out your garage or remodeling the bathroom. It is likely you’ll get these things done … eventually. But have you kept your retirement plan and life insurance beneficiary designations up to date?
Perhaps updating your beneficiary designations won’t provide immediate gratification like updating your bathroom or cleaning out your garage will, but the consequences of outdated beneficiaries could be outright devastating.
When you purchased your life insurance and set up your retirement plan and IRA accounts, you were asked to designate a beneficiary in the event you passed away. You may not have looked at this since. Life-changing events like marriage, divorce, birth or adoption could easily outdate your previous beneficiary designations.
A recent U.S. Supreme Court decision shed some light on the importance of keeping these beneficiary designations up to date. As part of a divorce decree, the wife waived her rights to benefits under her previous husband’s employer-sponsored retirement plan. Even though this agreement was documented in the divorce proceedings, the beneficiary designation form was never changed with the employer. Because the plan required all beneficiary designations be documented on the retirement plan beneficiary form, the Supreme Court ruled that the plan pay the ex-wife $400,000 rather than to the decedent’s estate.
Carefully plan and update all of your life insurance and retirement plan beneficiary designations. Designate a secondary beneficiary where applicable. Seek help from your trusted financial advisor to make sure all of your beneficiary designations are consistent with your family and tax-planning intentions.
For more insight, listen to Jentner Wealth Management’s weekly podcast by clicking here. Or download Jentner’s newest white papers on The Four Cornerstones of Prudent Investing and The Active Versus Passive Investing Debate.
