This weeks’ “MoneyDo” is: Review and update your beneficiary designations.
One term we use often here is “mish mash.” It’s a colloquialism that refers to a bunch of ideas or investments or plans that people sometimes cobble together to be their financial plan. What people who have a “mish mash” discover is that it’s hard to manage, difficult to update and track, and could have some negative effects on reaching your goal.
We see a “mish mash” occur with estate planning and beneficiary designation. The negative effects of not having coordination and organization here are pretty severe. The best gift you can give your family is a clean and easily-executed estate.
- You may have a well-crafted estate plan – and if you don’t, make sure your advisor has a team of professionals ready to help you, like we do at Annex Wealth Management – but one common error occurs when investors have the option of naming beneficiaries directly on a wide range of financial products.
When the account owner dies, the assets go directly to the beneficiaries named on the accounts, bypassing the sometimes long and costly probate process.
Because these beneficiary designations override your will, they need to be carefully coordinated with your overall estate plan.
- Our Financial Planning team tends to recommend reviewing all of your beneficiary designations regularly, but certainly after you experience a life-changing event, such as a marriage, divorce, birth or death of a loved one.
***That includes job changes and retirement. Beneficiary designations on retirement plans don’t carry over when you roll a 401(k) to a new employer’s plan or to an IRA, or when you convert a regular IRA to a Roth IRA.
