Beneficiary Designations


woman working with a financial plannerAs your life has changed, have you updated your beneficiary designations?

When you first started contributing to a retirement plan, you named a beneficiary or beneficiaries for your plan contracts. Your beneficiaries are the people or entities (such as trusts, charities or estates) who will inherit your retirement assets when you pass away. You likely have designated beneficiaries for other investments and financial products, such as IRAs, annuities, mutual funds and life insurance. But have you updated these beneficiary designations as your life has changed?

Remember, your beneficiary designations have significant legal standing: They even supersede those you name in your will. Neglecting to update these designations means your money may not be distributed according to your wishes. In fact, if you don’t name your beneficiaries, your assets could get tied up in probate court — resulting in unfavorable tax treatment of your funds.

When reviewing your beneficiaries:

  • Don’t forget your spouse or partner. If you marry or divorce, revisit your designations to ensure your money will go to the right people. Note, however, most retirement and tax-deferred annuity plans (except for government plans) are subject to joint and survivor requirements ensuring that at least 50% of the value of a married participant’s account goes to the spouse unless a waiver has been signed. These joint and survivor requirements supersede any contract beneficiary designations.
  • Name each of your children. Don’t forget to add the names of all your children on beneficiary designation forms. This often happens when children are born after the initial designation.
  • Be contingent. It’s important to name contingent beneficiaries — the people, trusts, charities or estates who will inherit the money if the primary beneficiary dies before you do

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