Remember to Keep Track of Your Beneficiaries

Oct 10, 2016

MoneyLife100When opening an individual retirement account (IRA), purchasing a life insurance policy or annuity, or beginning contributions to a retirement plan such as a 401(k), you are typically asked to choose a beneficiary. Whether it’s your spouse, children, friends, or parents, a beneficiary is the person you designate to receive your accounts after you are deceased. 
Too often, though, beneficiaries are chosen and then forgotten once an account is officially opened, which could lead to legal issues down the road. The Pennsylvania Institute of Certified Public Accountants (PICPA) reminds account owners to regularly check who their beneficiaries are so that the most appropriate person receives their accounts.

Review after a Life-Changing Event

It can be difficult to remember to check beneficiaries when managing your accounts, but it is an important habit to develop. For instance, you might open an IRA at a local bank once you have landed your first job after college, and list your mother or father as a beneficiary of the account. As years pass, you may decide to get married and roll your bank IRA into a brokerage IRA after a few more years. This all may be done while forgetting to change the beneficiary of your IRA to your spouse.

The lesson here is that you should check your beneficiaries whenever you have a life-changing event. This can be marriage, a divorce, birth of a child, death of a family member, setting up an estate plan, or any other personal reason that might affect who you want to receive the account. If you don’t remember who your beneficiaries are, ask your financial planner to provide a list of known beneficiaries for each account and insurance policy to make sure these individuals are still your desired beneficiaries.

Beneficiaries and Estate Planning 

Your beneficiary designation will determine who will receive an account even if your estate planning documents state otherwise. Let’s say you remarry after you and your ex-spouse have been divorced for several years, and you unexpectedly pass away after some time. If you never changed the beneficiary designation of your retirement plan to your current spouse, the funds will pass to the former spouse. 
Choosing a beneficiary designation is a simple and effective estate planning strategy that allows the account to pass without going through the probate process. The beneficiary, then, would have access to the funds more quickly.

Other Questions to Consider

Here are some other financial planning items everyone should consider each year:

  • Is the executor or trustee listed in your will still willing and able to serve in that role?
  • When was the last time you reviewed your estate plan?
  • Does your current investment allocation in your retirement accounts match your age and risk tolerance?
  • Do you have adequate life insurance on your family?

Your CPA Can Help

Selecting the proper beneficiary designations is just a small part of a comprehensive financial plan. A CPA financial planner can help you develop a plan to accomplish your financial goals, which may include planning for investments, retirement, taxes, education, insurance, budgeting, and your estate. Find a CPA near you, or visit www.picpa.org/moneyandlife for more estate planning tips.

About PICPA

The Pennsylvania Institute of Certified Public Accountants (PICPA) is a premiere statewide association of more than 22,000 members working in public accounting, industry, government, and education. Founded in 1897, the PICPA is the second-oldest state CPA organization in the United States.

Money & Life Tips are a joint effort of the AICPA and the Pennsylvania Institute of Certified Public Accountants (PICPA), as part of the profession’s nationwide 360 Degrees of Financial Literacy program.


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