Check Your Beneficiary Designation

One very important and often overlooked aspect of estate and financial planning is the designation of the beneficiaries of retirement plan benefits. Upon your death, this non-probate asset will pass by operation of law to your designated beneficiary(ies) regardless of the terms of your will or trust. The balance in your account may be subject to federal and state estate taxes, and the transfer may result in the acceleration of federal and state income tax liabilities. Thus, any planning for these benefits should also include strategies for dealing with taxes on death and post-death distributions.

For example, you should consider ways to minimize these taxes at the same time that you decide to whom and in what manner the benefits should be paid. Thus, all basic estate planning considerations must be dealt with. For example, the following questions should be answered:

Who should receive the benefits
Should they receive them outright or in trust?
Should the benefits be payable over time or should the beneficiary(ies) have the right to accelerate the payments, even to the extent of taking a lump-sum?

In addressing these questions, it is important to correctly designate your primary and contingent beneficiaries. A proper designation will depend upon the overall intent and plan of disposition of your estate and the designation form should be prepared with the same degree of care as your will, power of attorney, or other documents.

Keeping your beneficiary designations up to date is extremely important, but unfortunately it’s an issue to which many individuals pay far too little attention. With any type of account (IRA, 401(k), insurance contract), beneficiary designations require special attention. Because circumstances continually change, we suggest that you contact your IRA custodians, insurance agent, and human resource officer periodically to review your beneficiary designations, just to make sure that you have properly designated who you want to receive these funds.

The articles and opinions in this publication are for general information only and are not intended to provide specific advice or recommendations for any individual.