A beneficiary review should be on your yearly financial to-do list. When you get life insurance or start a new retirement account, filling out the beneficiary designation is part of the process. It lets the company know where that money goes when you’re gone. But is that name you wrote down years ago still the person you want as a beneficiary? If not, the wrong person will get your money.
I recently got my monthly IRA statement from TD Ameritrade. Part of the email was a simple question that asked “Is your IRA beneficiary up-to-date?”.
I wasn’t slacking on keeping it updated, since I haven’t had a reason to change it. But keeping track of it certainly wasn’t a priority either.
An IRA is one of several accounts or documents that have beneficiary designations. Keeping track of it all can be tedious. An easy beneficiary review checklist is the place to start.
Beneficiary Review Checklist
Be as specific as possible when filling out a beneficiary form. In other words, have a backup plan just in case. Take advantage of the primary and secondary designations when available. A change of beneficiary form is usually all you need to make a change.
- Retirement Accounts – this includes pension plans, 401k, 403b, SEP, Simple, Roth, and Traditional IRAs. If you’ve changed jobs a few times, rollover old retirement accounts from earlier jobs into one IRA. This will save you time and hassle next year and your money will be easier to manage.
- Life Insurance – this includes any life insurance benefits through work. Contact the insurance company to make sure the changes were received and processed.
- Annuities – it’s also a good idea to check the annuity payment options, since the beneficiary may not have a choice in how the funds are received.
- Bank Accounts/Brokerage Accounts – some states allow you to use a ToD (Transfer of Death) designation. This allows the beneficiary access to the accounts with only a death certificate. It also protects against probate.
- 529 College Savings Plans – the beneficiary of a 529 plan can be changed once a year. Say you’re saving for college for two kids – the first is listed as the beneficiary but ends up with a full ride scholarship. You can easily change the beneficiary to your other kid. Or if there is money left after graduation, instead of taking it out, you can leave it alone for your grandkid’s future education.
- Health Insurance and HSAs (Health Savings Accounts) – your HSA can be used to pay your medical bills up to one year after death. Make sure you designate someone responsible enough to pay those costs. Otherwise, your estate will get stuck with the bill.
- Wills and Trusts – having a will and keeping it updated is a must. A will alone won’t cover all your accounts. Beneficiary designations on retirement accounts, life insurance, and annuities override anything in a will.
The best thing to do is keep all beneficiary documents in one place. You can take it a step further by having contact information or claim forms that explain how to collect the money.
Review everything once a year or when you have a life changing event (marriage, birth of a child, divorce). Talk to a qualified attorney to make changes to a will or trust. Keeping your beneficiaries up-to-date is the best way to guarantee who gets your money.