I will never forget a story told by a friend working with an insurance company. A member had opened an account with them in the earlier years and the widow just assumed that she was the beneficiary of the account once he was deceased.
Only to realize later that her deceased husband never updated his original account card which still listed the first wife of only two years (deceased) as the beneficiary instead of his second wife of forty years.
He was a wealthy man with a substantial amount of money in his bank account. His wife had to go through a lot of paper work as well as attend numerous court sessions before she was finally allowed to access the funds. That just made me feel bad for her.
As life changes, so should your plan
Most people never bother with revising their paper work once they have taken life insurance or any other policy that involves beneficiary. It is important that you update your beneficiaries as life changes otherwise you leave your family and loved ones buried in a lot of legal work in addition to dealing with your passing away.
Do you have an account that listed your parents as beneficiary when you were single but now you’re married? Has your beneficiary passed away? Have you remarried? Do you have children now that you want as beneficiaries?
When your employer puts you on the company’s retirement or enroll on one individually, you probably named a beneficiary for your plan account and quickly forgot about it. You should take time to review your retirement account beneficiary designation every so often. You may find that you want or need to change it.
The person you name as the beneficiary of your life insurance or retirement plan account will receive the money in your account if you die. This is regardless of whether you already have a will which designates another person as the inheritor of all your assets.
The will does not affect your retirement account. Even if you have a will which designates another person to inherit all of your assets, it generally won’t affect your retirement account. The money will automatically pass to the person designated as your account beneficiary.
If you are married, many life insurance or retirement plans will require you to name your wife or husband as the beneficiary. However if you feel like she is not the best person to get the money, you can name someone else as the beneficiary provided your spouse consents to it thus waving their rights to your assets.
If you are a single parent, it only makes sense to leave your assets to your children.Things get a little complicated when your children are minors. As a single parent, you will automatically plan for your assets to go to your children. However, most life insurance or retirement plans will not transfer the funds directly to your children. Instead they will leave it to the court to appoint a trustee or guardian.The court process however takes time. Meanwhile, the money will not be available to your children.You can easily avoid this by naming a trust for the benefit of your children as the beneficiary of your account. If you decide to go that route, be sure to talk to your legal advisor.
If you’re unmarried and don’t have any children, you may decide to name your parents as your beneficiaries. If you get married later on, you can change your beneficiary designation.
Life is always changing and with it new people come into our lives and others leave it.
All these should be reflected in your life insurance or retirement papers. Checking your beneficiary designation will help ensure that your retirement account assets will be passed on as you wish.
Even as these events occur in your life, be sure to review your retirement plan account’s beneficiary designation:
- You get married.
- You add a child to your family.
- You get divorced.
- Your primary beneficiary dies.