11 Jul 2024 The Importance of Beneficiary Designations

A recent The Wall Street Journal article was shared in the Friday Brief email a few weeks back: His Ex Is Getting His $1 Million Retirement Account. They Broke Up in 1989. The article details how two people, Jeffrey Rolison and Margaret Sjostedt, dated for a few years in the 1980s. Jeffrey filled out his beneficiary designation for his profit sharing and savings plan at P&G. Since he was dating Margaret at the time, he put her as his primary beneficiary as a cohabitor. He never updated that designation and now after passing away his million-dollar account is stuck in lawsuits between Margaret and his brothers.

While this may seem like a story that is closer to a setup for a Hollywood movie, this is more of a potential reality than a lot of people realize. The reason is found in a common beneficiary designation misconception: people think that their Last Will and Testament trumps their beneficiary designations. Unfortunately, this is not always the case, as a beneficiary designation is a contractual obligation – the form will dictate what happens to the account before your Estate is even settled. It is important to review these items every now and then to confirm they are up to date.

A few tips on making sure your money goes where you want it to go.

• Confirm that your beneficiary designation is correct on all of your accounts – It isn’t just retirement accounts that need beneficiary designations, but also take a look at your life insurance policies, pensions, annuities, and any other accounts you may have. At Beacon, we want to take a look at all of these accounts and beneficiary designations for our clients on a routine basis to confirm they are as expected.
• Name a primary and contingent beneficiary – It is important to have the primary beneficiary named, but it is also good to go ahead and name a backup person (or entity). Consider the age and maturity level of children when naming them outright.
• Coordinate with your Will and Trust (if applicable) – A lot of people spend a good amount of money on estate documents from attorneys, but then never take action on updating their beneficiary designations to match what their attorney recommends. It may make sense for your specific situation to have a Trust receive the money instead of an individual.
• Update and review at key life events – There are a number of events where it will make sense to look fresh at your beneficiary designations: marriage, death, children aging, or even just a change in your wishes. As these moments come, prioritize looking at your accounts once more.

Two of the big items that we help clients with at Beacon are organization and looking at the big picture. People get so busy and caught up in life that things as small as a beneficiary designation can get lost in the mix, even if they can have profound impacts down the road. While we are happy to help clients through questions like these, we can also be helpful in pointing you in the direction of an expert (an estate attorney in this instance) when needed. We love to walk our clients through a comprehensive financial plan that incorporates all of these items (and more!).

The content above is for informational and educational purposes only. The links and graphs are being provided as a convenience; they do not constitute an endorsement or an approval by Beacon Wealthcare, nor does Beacon guarantee the accuracy of the information.