Have You Reviewed Your Beneficiaries?
Why should you regularly review your beneficiaries?
What do you want to happen to your estate after you’re gone? It’s not a comfortable topic but is important to consider. Your beneficiary designation can have a profound effect on what your heirs can do with your assets.
In general, beneficiary designations should be —
Up-to-date — Changes in your family situation, tax laws and overall wealth make a periodic beneficiary review a necessity. The birth, or adoption, of a child/grandchild, the death of a beneficiary or a divorce should trigger a full review of your estate plan.
Flexible — Consider using both primary and contingent beneficiaries. A contingent beneficiary will receive the asset if the primary beneficiary dies before the account owner or if the primary beneficiary refuses the asset.
Personalized — Your situation is unique. What if you want 100% of your estate going directly to your beneficiary immediately? Maybe other estate planning strategies might make sense. We can help with these issues.
Why should you consider two “levels” of beneficiaries?
Your bank accounts, life insurance policies and retirement accounts should have both “primary” and “contingent” beneficiaries. The primary beneficiary gets the death benefits if he or she can be found after your death. Contingent beneficiaries get the death benefits if the primary beneficiary can’t be found. If no primary or contingent beneficiaries can be found, the death benefit will be paid to your estate and subject to the state statues in the state you reside in.
As part of naming beneficiaries, you should identify them as clearly as possible and include their social security numbers. This will make it easier for the companies to find them, and it will make it less likely that disputes will arise regarding the death benefits. For example, if you write “wife [or husband] of the insured” without using a specific name, an ex-spouse could claim the death benefit. On the other hand, if you have named specific children, any later-born or adopted children will not receive the death benefit —unless you change the beneficiary designation to include them. Think Anna Nicole Smith.
Besides naming beneficiaries, you should specify how the benefits are to be handled if one or more beneficiaries can’t be found. For example, suppose you have two children and you name each one to receive half of the death benefit. If one of the children dies before you do, do you want the other child to get the entire death benefit, or the deceased child’s heirs to get his or her share?
If the death benefit goes to your estate, probate proceedings could delay distributing the money, and the cost of probate could diminish the amount available to your heirs.
Jefferson Pilot Securities Corporation and its representatives do not offer tax or legal advice. Individuals should consult their tax or legal professional regarding their specific circumstances.