Why you should regularly review beneficiaries
Imagine this. Your ex-spouse is enjoying a fabulous cruise around the world thanks to your generosity following your untimely death.
Sound good? No? Well, it’s happened to more than one unfortunate soul, and all because they didn’t take the time to review and update their beneficiaries when they got divorced. The truth is it’s easy to jot down a beneficiary for a 401(k) plan or life insurance policy and then forget about it. That person may have been exactly who you wanted to receive your assets at the moment, but situations change over time, and so can who you want to receive your assets.
When to review
Beyond a marriage or divorce, there are other life events that justify a review of beneficiaries and the titling of assets. For example, the birth or adoption of a child, or the death of a parent, spouse, sibling or child. All of those events require a rethinking of who gets what in the event of your passing.
For those who are not married and do not have kids, they are not off the hook. By default, if you die without explicitly naming beneficiaries, your assets will typically go to your parents if they are living. Is that what you want? Do your parents need your assets? Perhaps you would rather your assets go to a sibling, or maybe a friend or significant other. Ensure that happens by taking the time to designate exactly those who you want to be your beneficiaries.
More than just 401(k)s
When identifying beneficiaries, many people only think about their 401(k) plan or life insurance policy. However, there are many other types of assets that require consideration. Those include bank accounts, investment accounts, real estate, personal property like collectibles or cars, and more. The person who you want to receive assets from a 401(k) account may be different from the person you want to inherit your family’s heirloom jewelry collection. Specifically consider who you want to get what and fully examine all of your assets, monetary and otherwise.
Just the beginning
As important as it is to regularly review beneficiaries and the titling of assets, that exercise is just the beginning of what should be a comprehensive planning process. Regardless of your level of wealth, everyone should have a will or estate plan. Those documents will more fully spell out who gets custody of minor children, as well as how and when your heirs will receive any assets. In addition, a health care directive and power of attorney are also crucial components of a fully fleshed out plan.
In addition, many investment accounts allow you to name a name a “trusted contact” who your financial advisor can reach out to in the event that you begin to make unusual or irrational decisions, which sadly can happen when people begin to experience dementia or are the victim of fraud.
As the old saying goes, it’s better to be safe than sorry. Review your beneficiaries and the titling of assets at least annually with your financial advisor to ensure the legacy you want to leave is realized.