A good time to review and update your beneficiary forms is near the end of the year or after a significant life event.

Beneficiary Designations

A beneficiary is typically a person named or designated to receive proceeds from a life insurance policy or benefits from a retirement plan or IRA after the account owner or insured dies.

If you are contributing to a 401 (k) or 403 (b) plan at work or other retirement plan, such as a traditional or Roth IRA, then you may remember choosing a beneficiary when you enrolled in the plan.

But over the years, many things can happen in life that might require changes to your beneficiary designations, such as a marriage, divorce, birth of children, or death.

Spouse Versus Non-Spouse Beneficiary

Typically, a married couple will name each other as the primary beneficiary of their life insurance policy and retirement plans.

After the first spouse dies, the survivor should change the beneficiary on their life insurance policy and retirement accounts as soon as possible. It’s easy to forget about this. After the funeral, everyone goes back to work and living life and sometimes these things don’t get done.

Know the Rules

Different rules apply to spouses and non-spouse beneficiaries of individual retirement accounts (IRAs). The SECURE Act and SECURE Act 2.0 changed the rules for taking distributions from IRAs. The rules impact spouses and non-spouse beneficiaries differently.

Also, there is a deadline for splitting inherited IRAs if there is more than one designated beneficiary.

There are many choices when you inherit an IRA. Making a mistake when inheriting assets could trigger a huge tax bill and cause you to lose out on an opportunity for many years of tax deferred growth.

Marriage, Death, or Divorce

Naming a beneficiary is not something that you should do once and forget about. In fact, anything that affects your future financial security and that of your family is something that you should review and update regularly.

Imagine a surviving spouse finding out that a former spouse is still named as the primary beneficiary of a decedents 401 (k) plan. The consequences could potentially ruin a survivors’ retirement plan, especially if it was a sizable account.

Unfortunately, this type of thing happens more often than it should. Don’t let it happen to you. Changing the beneficiary after divorce will ensure that a life insurance benefit from a company plan will be paid out to the person you desire.

Working with a CFP® practitioner

If you are working with a CFP® practitioner, he or she should keep copies of your beneficiary forms on file and review them with you at least once each year and/or after significant life events.

If you are not working with a CFP® practitioner, contact us today and we will take care of this for.

Better yet, find out if your overall retirement and estate plan is on solid ground and sign up with us online.