Know Your Beneficiary!

June 13th, 2008 at 10:19am Kim S. Cady

  Kim Cady 

Do you know who is listed as your beneficiary when it comes to your retirement account?  You should check this periodically, especially if you have had a life changing event, such as a marriage, divorce, or added children to your family.  There have been many cases where the designation was not what the deceased had wanted, but the documentation was never changed, resulting in legal battles for the survivors.  You certainly would not want your third child to have to take his/her two older siblings to court for a share of your account; or your spouse having to battle with your ex-spouse. 

For qualified plans such as a 401(k), Profit Sharing, or Money Purchase – federal regulations require the spouse be named as primary unless the spouse approves of another designation.  This approval must be documented and notarized. 

For IRAs – state law determines the treatment if no beneficiary designation is made.   

You can revoke your existing beneficiary designation simply by submitting a change-of-beneficiary form naming a new beneficiary. 

You should also consider naming a contingent (secondary) beneficiary in case of a simultaneous death.  If not named, state law will determine how your benefit will be distributed, again not necessarily as you would have desired. 

Here is a checklist to help make a proper beneficiary designation: 

• Always check the default provisions in your account’s document to know what will occur if your beneficiary predeceases you and you fail to make subsequent changes. 
• Know the tax implications for the type of beneficiary you choose – a person such as a spouse or non-spouse; a trust; estate; or a charity. 
• Obtain confirmation that your designation has been received and on record from your account administrator. 
• Check with your account administrator periodically to review your beneficiary designation. 

Entry Filed under: Retirement Planning