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Updating Heirs on Your Accounts

This article explains why beneficiary forms for retirement accounts and insurance policies supercede instructions in a will.

The beginning of the year is a time when many people reflect on the past and look forward to the future. It may also be a good time to review your beneficiary designations to make sure they reflect your current wishes.

This is especially important if there have been changes in your life, such as the birth of a child or grandchild, a death in the family, a divorce, or a remarriage. But even if your family situation remains the same, it’s a good idea to review whether you have completed and updated all appropriate beneficiary forms.

A Will May Not Be the Way

A will is an essential legal document for naming beneficiaries, not only for financial assets but also for personal items. A trust may also be helpful in some situations. However, the assets in most retirement accounts and life insurance policies convey directly to the people named on the beneficiary forms — even if they are different from the people named in your will or a trust — and do not go through the probate process.

Fortunately, it’s fairly easy to designate or change your account beneficiaries.

Unlike wills and trusts, which can be expensive to update, you can simply file a new beneficiary designation form with the appropriate financial institution or insurance company.

Here are some issues to consider as you review your beneficiary designations.

  • Your current spouse must be the beneficiary of an employer-sponsored retirement plan unless he or she waives that right in writing. Without a waiver, this could mean that any children from a previous marriage would not receive any account proceeds.

  • Designate secondary or contingent beneficiaries in the event that the primary beneficiaries predecease you. Otherwise, proceeds would be distributed according to the default method specified in the account documents and/or state law.

  • Some insurance policies, pension plans, and retirement accounts may not pay death benefits to minors. If you want to leave money to young children, you should designate a guardian or a trust as beneficiary.
  • The use of trusts involves a complex web of tax rules and regulations. You should consider the counsel of an experienced estate planning professional and your legal and tax advisors before implementing such strategies.

    Feel free to share this article with your friends and neighbors.

    If I can be of assistance to you in any way, please feel free to contact me.

    Time is your best friend when investing for your future — start today!

    JON TEN HAAGEN, CFP, RPC
    Founder and CEO
    Ten Haagen Financial Group
    191 New York Avenue
    Huntington, NY 11743
    631-425-1966
    516-658-2827
    jonlth@tenhaagen.com
    www.tenhaagen.com

    The information in this article is not intended as tax or legal advice, and it may not be relied on for the purpose of avoiding any federal tax penalties. You are encouraged to seek tax or legal advice from an independent professional advisor. The content is derived from sources believed to be accurate. Neither the information presented nor any opinion expressed constitutes a solicitation for the purchase or sale of any security. This material was written and prepared by Emerald. Copyright © 2013 Emerald Connect, Inc.

    This post is contributed by a community member. The views expressed in this blog are those of the author and do not necessarily reflect those of Patch Media Corporation. Everyone is welcome to submit a post to Patch. If you'd like to post a blog, go here to get started.

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