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Have your beneficiaries been reviewed lately?

When you purchased life insurance and started your retirement savings account, you were instructed to name a beneficiary for those funds. And like most people, you probably haven’t thought twice about it since. But as time goes by and life changes occur, it becomes increasingly important to review all aspects of your estate plan, especially your beneficiary designations.

Why are designated beneficiaries important?

A beneficiary is a person or entity that receives proceeds from your will, trust, accounts or life insurance policies upon your death. By not naming a beneficiary, you give up control over how those assets are distributed. Those proceeds will become part of your estate and depending on how your estate plans are set up, it may be up to the court to decide how they’re allocated.

Should you name secondary beneficiaries?

As with anything in life, it’s always good to have a backup plan. Naming secondary beneficiaries is added protection for your assets. A secondary beneficiary will only collect proceeds if your primary beneficiary dies before you or disclaims their inheritance.

Does your beneficiary have to be a relative?

For the most part, you have free will to name whoever you want as your beneficiary. You also have the option to divide your assets between multiple beneficiaries; this is a popular choice for those with more than one child.

Can a beneficiary supersede a will?

The short answer, yes. A beneficiary can override a will no matter how long ago they were named.

How often should your beneficiaries be reviewed?

It’s in your best interest to review all accounts and policies at least once a year. Consider adding this to your tax season to do list as you’re reviewing accounts in preparation of filing.

Reviewing your beneficiaries is particularly important upon any of the following life changes:

  • Marriage
  • Divorce
  • Birth of a child
  • Death of a named beneficiary

What accounts/policies include a beneficiary designation?

There are a number of accounts and policies that ask for a named beneficiary, some of which you may have forgotten about. Use the following checklist to determine what might need reviewing:

  • Life insurance
  • Health insurance or health savings account (HSA)
  • Retirement accounts (pension, 401(k), IRA)
  • Wills and trusts
  • Bank accounts
  • Annuities

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