Do you remember the last time you checked the beneficiary designations on your retirement accounts? Better yet, do you remember who is presently listed? If you answered yes to either question, you’re a step ahead of many. If you answered no, it is time for a beneficiary designation review.
Your retirement account beneficiary designations are powerful. They are legally binding and supersede your will and trust instructions. For that reason, ensuring your beneficiaries are correct and up-to-date is the best way to be certain your retirement assets are distributed exactly as you wish at the time of your passing.
Imagine, for example, your will states that your retirement account assets should be equally distributed among your three children when you pass. However, your IRA account designates only two of your three children as beneficiaries. The third child, who is not listed, will not inherit any of the IRA account assets when you pass away.
When opening a new retirement account and naming beneficiaries, your selections at that time may seem obvious. Years later, though, those original choices may no longer make sense. Major life events such as marriage, divorce, death or the birth of a child may prompt the need to make updates. Not surprisingly, this task can slip to the bottom of an endless to-do list and easily be overlooked. One way to avoid missing this critically important, yet easily forgettable task is to implement a practice of reviewing your beneficiary designations annually.
A good time to do this verification is when you file your taxes each year. During this time, you are already gathering important documents. While you are doing so, take a few moments to check your beneficiary designations, making sure to implement any necessary changes. This simple habit will put your mind at ease knowing your money will go exactly where you intend it to go.