5 easy steps to take when reviewing your beneficiaries

By Reagan Bonlie
No Comments

Regular estate plan reviews guarantee beneficiaries are catered for.

Regularly checking beneficiary designations against your estate plan may not seem critical, but ignoring it could harm your loved ones. A beneficiary designation that hadn’t been changed for years has given many ex-spouses a windfall. Work with a financial professional to ensure designations are current.

Here are 5 easy steps to take when reviewing your beneficiaries:

  • Get a grasp on your finances.
    Insurance policies, pensions and retirement accounts, such as Roth IRAs, traditional IRAs and 401(k) plans, usually ask for primary and secondary beneficiaries. Dig into the details of these accounts to confirm they indeed require beneficiaries, and note who you’ve named to receive the proceeds when you die.

    For more complex assets or nontraditional investments, such as private equity holdings or specialty assets, you may need additional paperwork to set up beneficiaries. Make sure there’s a roadmap that estate executors can follow to all your holdings.
  • Run a family roll call
    Consider how your family has evolved since you last updated beneficiaries. What weddings and births have broadened your family? Who died and divorced? How has the family changed over time? Life may require revising beneficiary designations.
    When presenting to your children or grandchildren, understand that equal shares may not always be fair. A nonprofit-working son may receive a different percentage of your estate than a multinational CFO daughter. Maybe now.
  • Consider taxes
    Beneficiary distributions are taxed. Not all. Federal estate and gift tax rules change, and state laws complicate matters. Taxes can reduce your well-meaning gifts.

    may let you make tax-free annual family presents. These may be direct gifts or gifts into your accounts. Knowing your beneficiaries early can reduce your next generation’s tax burden.
  • Align your entire estate plan
    Beneficiary designations can aid estate planning. Life insurance and retirement account distributions are usually settled outside your estate and faster. Calibrating between these accounts and other assets can help your estate plan achieve your preferences.
  • Change things up as you see fit
    With the data you gathered in steps one through four, you may make the necessary adjustments to the beneficiaries. Then, document the changes to facilitate the procedure the next time around.

The process of reviewing beneficiaries can be difficult on many levels, including the heart and the head, but it is necessary for every estate.