A beneficiary review means routinely checking and updating the beneficiaries listed on your financial accounts—like life insurance policies and retirement plans—to make sure they match your current wishes and circumstances. Doing so helps prevent problems, ensuring your assets are distributed just as you intend.
Regardless of the existence of a will, the beneficiaries specified on your accounts take precedence over those named in your will.
Why should you have a Beneficiary Review?
Prevent Issues: Keeping your beneficiary information up to date avoids disputes and guarantees your assets go where you want them to.
Account for Life Changes: Major events such as marriage, divorce, or having a child often require changes to your beneficiary list.
Skip Probate: Properly assigned beneficiaries can receive their inheritance directly, without facing lengthy probate processes.
It is important to recognize that while bypassing probate allows funds to be promptly accessible to the beneficiary, it does not exempt them from the obligation to pay applicable federal or state inheritance taxe
How do you conduct a Beneficiary Review?
- Collect Documents: Gather recent statements or log into online accounts for all relevant financial products.
- Inventory Accounts: List of all pertinent accounts, like:
Retirement accounts (401(k), IRA)
Personal investments with payable-on-death (POD) designations
Life insurance policies
Annuities
Bank accounts with payable-on-death (POD) designations
- Routine Checks: Review your beneficiary designations every few years.
- Verify Beneficiaries: Check current beneficiary names to see if they still align with your wishes.
- Make Updates: If necessary, contact your financial institutions to fill out the required forms to revise your beneficiaries.
- After Significant Life Events: Perform a review whenever you experience major changes in your life. As mentioned above, marriage, divorce, additional children or grandchildren, the passing of a spouse, etc.
Conclusion
Beneficiary reviews are an essential part of estate planning. By keeping your designations current, you safeguard your legacy and ensure your assets are passed on according to your wishes. Regular updates can spare your loved one’s unnecessary complications later.