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By David S. Markle, CPA, PFS, CFP, CGMA | Markle Wealth Management

A beneficiary is the person who will receive an account after you die. Typically you chose a beneficiary when you open an individual retirement account (IRA), purchase a life insurance policy or annuity, or begin contributing to a retirement plan, such as a 401(k). A beneficiary can be your spouse, children, friends, and in special circumstances a trust.

Too often, we pick a beneficiary when we open an account then forget about it. They rarely get changed.

Let me give you a personal example. When I first started working after college, I opened an IRA at a local bank. I contributed to it on a regular basis. When I set it up, I listed my mother as my beneficiary. Several years later, and after I was married a few years, I decided to roll my bank IRA into my brokerage IRA. It was at that point I realized I had never changed the beneficiary to my spouse.

The lesson is that you should check your beneficiaries whenever you have a change-in-life event. A change-in-life event can be marriage, a divorce, birth of a child, death of a family member, an estate planning strategy, or any other personal reason that might affect who you want to receive the account. My firm started a practice of annually providing a list of known beneficiaries to our clients for each account and insurance policy we knew about to make sure these individuals were still the clients’ desired beneficiaries.

The beneficiary designation will determine who will receive the account even if your estate planning documents state otherwise. Many years ago I had a client who had been divorced for many years, and both spouses had subsequently remarried. My client’s ex-spouse died unexpectedly. This lead to the decedents current spouse’s attorney sending a letter stating the ex-spouse had neglected to change the beneficiary designation on his employer retirement plan to his new spouse, and was requesting my client sign a disclaimer of benefits form so the assets could be paid to the ex-spouse’s current wife. My client refused to sign the disclaimer and received the benefits from the qualified plan.

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.

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?

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.

David S. Markle, CPA, PFS, CFP, CGMA, is a financial advisor and owner of Markle Wealth Management, a fee-only planning firm.