Marriage, divorce, birth, and death – some of these life events are certainly more fun than others. But when they happen, they each demand our attention and often trigger a set of to-dos. Amidst the celebration (or chaos) that unfolds, updating beneficiary forms rarely tops the priority list. However, overlooking these (frankly) mundane administrative tasks can have real consequences for the legacy you’re diligently building.
So, if reviewing the beneficiary forms associated with your accounts is something you haven’t gotten around to in a while, why not add them to your spring cleaning list? Let’s break down why maintaining current, accurate designated beneficiary forms is so important and walk through an easy-to-follow checklist to ensure your estate planning is up-to-date.
Why Beneficiary Forms Matter
Beneficiary forms lay out how your assets will be distributed upon your death, particularly for
retirement accounts and life insurance policies.
- Asset Distribution: Beneficiary forms override your will when it comes to certain assets like retirement accounts. Regardless of what is stated in your will, these assets will be distributed according to the designated beneficiaries listed on the forms.
- Avoiding Probate: Assets with designated beneficiaries typically bypass the legal process of settling your estate, ensuring a smoother and quicker transfer of wealth to your intended recipients upon your passing.
- Flexibility: Beneficiary forms allow you to update your preferences without having a lawyer present, meaning you can easily update your forms to adapt to life changes like marriage, divorce, births, or deaths in the family.
The Beneficiary Form Checklist
Now, as you sit down to review your forms, here’s what to double-check:
- Location of Forms: Hey, where are those things anyway? It’s crucial to know right where your beneficiary forms are kept. Make sure they are easily accessible and well-organized. If you have a fireproof safe or a locked filing cabinet, that’s a great spot for them!
- Form Verification: Take this opportunity to verify that the copies you have match the records held by trustees, custodians, or plan providers. If you find any discrepancies, correct them in short order to avoid any confusion later down the road. Keeping a record of the dates of revision additionally can be helpful.
- Contingent Beneficiaries: “Contingent beneficiaries” are those who will receive the assets if the named primary beneficiary is unable or unwilling to do so. If you haven’t already named them for each account, now’s the time to do so. As unpleasant as it sounds, unforeseen circumstances do happen and primary beneficiaries may predecease you. Be prepared for all cases.
- Clarity and Specificity: Clearly state each beneficiary’s share of the assets designated to them. If there are multiple beneficiaries, specify the percentage or portion of the assets allocated to each individual. This clarity helps prevent future misunderstandings among recipients.
- Integration with Estate Plan: Your estate plan should encompass all aspects of your financial and asset management, including beneficiary designations. Ensure that your beneficiary forms align with the overall goals outlined in your estate plan, especially where retirement assets are concerned.
While updating beneficiary forms is as mundane a task as cleaning your oven or unclogging your gutters, it’s a relatively simple task that can have a huge impact on your legacy. Taking a few minutes to arrange your beneficiary information now will save your loved ones huge time and headaches in the future and ensure your assets are distributed according to your wishes.
Between window washing and firing up the lawn mower this spring, spare a bit of time for this important administrative chore. And should you need any assistance, give us a call: 952-460-3290.
