Review Your Beneficiary Designation Forms


When it comes to your estate plan, it is important to periodically review your beneficiary designation forms in order to ensure that they are correct. This is a vital part of the planning process for all individuals, and it is often overlooked, many times causing the person that an individual wanted to receive certain assets to receive nothing.

By way of example, every time an individual starts a new job, opens a retirement account, or takes out a new life insurance policy, one of the initial forms the individual will complete is a beneficiary designation form that dictates who will receive the assets of an individual’s retirement account or life insurance policy upon his/her death.

For example, if an individual starts a new job when he is unmarried and has no children, he may list his mother as the beneficiary of his IRA, 401(k) and/or life insurance policy.  Fast forward ten years, and the same individual is now married with three children, but he has not updated his beneficiary designation form(s).  If he dies unexpectedly, the assets held under his accounts will be paid not to his surviving spouse or his children, but to his mother.  While the individual’s mother could pay the proceeds to the surviving spouse, there would be potential gift tax considerations. Conversely, it is possible that the individual’s mother could choose to keep the proceeds for herself.

It is imperative that individuals periodically review their beneficiary designation forms (along with their estate planning documents) to ensure that they are up to date and in line with their current planning strategy.  In this regard, individuals should keep copies of their beneficiary designation forms in a safe, but accessible, location so that if necessary, changes or modifications can be made relatively easily.  Most importantly, when an individual has a significant life change, such as marriage, divorce, or the birth of a child, it would be wise to review the beneficiary designation forms associated with said individual’s accounts (e.g., 401(k), IRA, life insurance, etc.) to ensure the correct beneficiaries are named on the form.


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