Choosing Beneficiaries and Keeping it Beneficial

With the start of a new year, we often take time to reflect on the past, look forward to the future, and generally set goals to get our houses in order—whether our physical houses, our fitness houses, or our financial houses. One of those areas in your financial house to look at includes reviewing your beneficiaries. Life insurance policies and your retirement plans—401Ks, IRAs, and annuities—should list beneficiaries. But several questions arise here.

Do you have the proper life insurance that you need? (If not, I would be happy to put you in touch with folks who can help!) Do you have a plan for retirement? (Again, if not, I know people and would be pleased to provide you with a few to choose from among.) And if you do have those things, who are your beneficiaries? Are they current? Has your life situation changed? Do you know the effect and impact of these decisions?

Incorporating Your Retirement Beneficiaries with Your Estate Plan

Your estate planning includes not only a will or a trust but also the bigger picture that incorporates how you have selected your beneficiaries. This includes those assets that you can pass along to others without a will or trust. But care should be taken in deciding how to pass those assets along.

Choosing the best beneficiary requires individualized considerations. And the old advice isn’t always the best. For example, some years ago, it seemed the general advice was to default to “Estate” as your beneficiary. If you’re in Florida, this alone could take an estate from a summary administration (or even no administration) form of probate (supervision by the court) to a full administration. This almost always requires, under Florida law, that an attorney be hired.

Other beneficiary designation choices involve children. If you’ve listed your minor children, who will help them manage that money? And if you list your adult children, do you know the impact of taxes when they inherit a 401K or an IRA? Without a trust, they have the option of taking all of the money at once, which means taxes being paid at their current tax level. This too would greatly reduce the amount of money they eventually receive.

Updating Your Beneficiaries

You can update these beneficiary designations. Many people complete paperwork when starting a new job, selecting the beneficiaries for your employer-offered insurance. Maybe you do the same for a 401K. Once done, many forget about it. And even in that process, people often do not seek the advice needed when considering the entire picture of their estates or life situations.

To review your choices and how that works with your estate plan, an estate-planning attorney can be an excellent resource. The start of the new year is a perfect time to get this part of your financial house in order. Together, you and your attorney can determine what works best for your situation when considering the options and the consequences. To talk about your goals, call an estate planning attorney to discuss your concerns and develop an estate plan that helps put your goals in your plan.