Thursday, 13 August 2009 15:43
People devote several hours to planning their retirement. They seek expert advice and watch the performance of their investments regularly but when it comes to naming a beneficiary, it is often done as an afterthought. If you don’t take into consideration this very important step of correctly naming a beneficiary(s): your wishes may go unheeded, your family may suffer because of difficult decisions that might need to be made, taxes that could have been avoideded may reduce the value of your estate or your estate could very likely end up in court. What are key points to remember when naming a beneficiary?
1. Consider the tax implications for the beneficiary. Your beneficiary may not be financially prepared for the tax burden that might come with certain types of inheritances. Talk to a financial advisor to make sure you are considering the tax implications in your estate.
2. Get spousal consent before naming another beneficiary. Especially with many company sponsored retirement plans, spousal consent is required in writing to name someone other than your spouse as the beneficiary.
3. Decide if a corporate trustee is needed. Depending upon the complexity of your estate and the abilities of your beneficiaries you may choose to name a trustee to administer your estate or to be a co-executor of your estate with another family member. Corporate trustees can bring knowledge of tax laws, impartiality to decision making and objectivity to requests that are different than your wishes.
4. Provide a full identity. Be sure on all forms to state the full name, social security number, date of birth and relationship to you of the beneficiary. This will help to make sure no one else can claim your inheritance.
5. Review your beneficiary information regularly. Beneficiary forms completed before getting married, divorced, remarried or before a daughter gets married or before all children are born may not accurately reflect your current wishes. Reviewing and making necessary updates to your beneficiary forms will ensure your wishes are followed.
So, if you haven’t looked at your beneficiary designations on the assets of your estate (401k, investment accounts, life insurance, etc) now is a good time to start that review process. And if you have had a significant life change (married, divorced, widowed, remarried, etc) you definitely need to consider reviewing the beneficiary information on all the assets of your estate very soon.