Review Your IRA, 401 (k) Beneficiaries | Community


Financial focus

If you’ve had an IRA and a 401 (k) for many years, sometimes you may ask yourself a few questions: “Am I contributing enough?” “Do I always fund these accounts with the right mix of investments for my goals and my risk tolerance?” “

But here’s a question you may not know: “Did I use the correct beneficiary designations?” And the answer you get is important.

It wouldn’t be surprising if you didn’t think much about the beneficiary designation – after all, it’s just something you signed up to once, maybe a long time ago. Is it really that bad?

It might be. On the one hand, what if your family situation has changed since you designated a beneficiary? If you remarried, you may not want your ex-spouse to receive your IRA and 401 (k) assets or the proceeds from your life insurance policy, for which you also named a beneficiary.

However, when it comes time to remarry, many people review their estate plans, including their wills, living trusts, enduring powers of attorney, and health care guidelines.

If you have revised these documents, do you have to worry about the old beneficiary designations? You might be surprised to learn that these earlier designations may replace what is in your updated will and other documents.

The end result could be an “accidental” inheritance in which your retirement accounts and insurance products could end up going to someone who is no longer in your life.

Additionally, your retirement plans and insurance policy may not require just one beneficiary – you may also be asked to name a contingent beneficiary, to whom the assets will be transferred if the primary beneficiary is already deceased. As you can imagine, the situation could get quite confusing if the stepchildren are involved in a remarriage.

To avoid these potential problems, be sure to review beneficiary designations on all of your accounts at some point – and especially after a significant change in your family circumstances.

If you see anything that is outdated or incorrect, contact your retirement account administrator – or your insurance representative, in the case of life insurance – to request a change of beneficiary form.

And if you really want to be on the safe side, you may want to hire a legal professional to help you with this review to ensure that beneficiary designations reflect your current family situation and match what’s in your family. estate plans.

In fact, if you are already working with an experienced estate planning lawyer – and you should – you can find other suggestions for dealing with beneficiaries as well.

To name just one, it is generally not a good idea to designate minor children as beneficiaries. Since children cannot control assets until they become adults, a court should probably appoint a guardian – a guardian you may not have wanted.

Instead, you can either appoint your own custodian to manage the assets allotted to the minor, or establish a trust for the benefit of the minor, which can split the money into installments over a period of several years – which is often a difficult time. good decision, because young adults are not always the best at handling large lump sums.

If you are like a lot of people, you have a strong desire to leave something behind. But you’ll want to do it the right way.

So pay close attention to your beneficiary designations – when you first create them and throughout your life.

(This article was written by Edward Jones for your local Edward Jones financial advisor.)

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