Life’s emotional challenges are often intertwined with life’s financial challenges. When it comes to advanced financial planning, these life challenges are scrutinized for their financial impact. Consider three significant life-changing events:
• the birth of a child
• the death of a parent
• the divorce of a spouse
When a family member enters or leaves someone’s life, that someone may need to update their will, so as to reflect that entrance or exit. In addition to updating one’s will, one may also need to update their trust. Lastly, and just as important, an individual needs to update the beneficiary designation on their myriad accounts – be it saving accounts, Individual Retirement Arrangement (IRA) accounts, or 401(k) plan accounts. A common financial planning mistake is neglecting to update these beneficiary designations.
Upon Cleopatra’s passing, Cleopatra’s $1,000,000 IRA account transfers to her ex-spouse, Julius – whom Cleopatra divorced two decades ago to marry Antony. This happens because Cleopatra never updated the account’s beneficiary designation.
Beneficiary designations supersede any will or trust documents. So, even though your will may declare that all of your assets go to your children, your dated IRA account beneficiary designation will give the entirety of your IRA balance to your ex-spouse.
These newlyweds are in a hurry to update their beneficiary designations.
It is important to review your beneficiary designations upon any significant events. Further, it can never hurt to review your existing beneficiary designations in the absence of any life changes. This serves to double-check any possible clerical errors on behalf of an investment custodian. Reviewing your beneficiary designations will ensure that your assets will transfer per your intentions.
Learn more about beneficiary designations at our Wealth Analytics Quarterly Webinar next month. Mark your calendar for July 31st at 1:00 p.m. RSVP for our Wealth Analytics Quarterly Webinar on beneficiary designations today by sending us an e-mail at service@WealthAnalytics.com.
[p]Geer, C. T. (2011, July 6). Beware the Beneficiary Form. Retrieved from The Wall Street Journal: http://online.wsj.com/news/articles/SB10001424052702303714704576383523441136038
Jacobs, D. L. (2014, January 3). How To Leave Your IRA To Those You Love. Retrieved from Forbes: http://www.forbes.com/sites/deborahljacobs/2014/01/03/how-to-leave-your-ira-to-those-you-love/ [/p]