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When it comes to securing your legacy, one of the most powerful yet often overlooked tools in estate planning is your beneficiary designations. The simple choice of who receives your financial assets from accounts such as employer-sponsored retirement plans, IRAs, life insurance policies, non-retirement brokerage accounts, and even bank accounts can significantly impact your estate plan. Yet too often, they are not set at all or set initially and forgotten, even as life changes. With a little focus and care, you can avoid common mistakes and make sure your wishes are carried out as intended. In this blog, we will walk through eight key tips to help ensure your beneficiary designations are current, aligned with your overall plan, and structured to protect your loved ones when it matters most.
While the focus here is on beneficiary designations, it is important to remember that estate planning is not exclusively for the wealthy. Everyone should have an estate plan. Whether your finances are simple or more complex, having a plan in place will bring peace of mind and avoid unnecessary expenses and complications.
Here are the core objectives of a well-thought-out estate plan:
To accomplish these objectives, it is imperative to have the right legal documents in place and to work with an estate planning attorney who can tailor these documents to your specific goals and personal circumstances. While more complex planning needs may require additional documents, let us take a look at some of the essential components every estate plan should include:
To help you stay in the express lane, consider these key tips for managing your beneficiary designations:
1. Name Both Primary and Contingent Beneficiaries – It is standard practice for retirement accounts to allow both primary and contingent beneficiaries, but some non-retirement and bank accounts may not. Include both levels whenever possible to help avoid probate. If you do not have a contingent beneficiary to name, consider a charity of your choice. This way you are controlling where your assets go. 2. Keep An Inventory of Your Financial Assets – Whether it’s a spreadsheet or in written form, keeping a list of all your financial assets including information such as the type of account, the registration, and current beneficiaries will give you a clear picture, help you manage your beneficiaries going forward, and provide your heirs with a roadmap to your assets. 3. Review Beneficiaries Regularly – You should review your beneficiary designations with your financial providers at least annually to ensure that they are accurate and still consistent with your goals. Pick a time of year and stick with it. At the start of the new year or after completing your tax return are two good options. Review them immediately if you have had a major life event such as a marriage, divorce, birth of a child, or death in your family. 4. Trust But Verify – It is ok to trust your financial providers. Most do an excellent job tracking and retaining beneficiary information. But do not take it for granted. Log in to your accounts or call to confirm your current designations. Print them out or request a confirmation letter for your records. If there is any doubt, submit updated forms and keep a copy for your records. 5. Know Your Providers Rules – While its standard practice for retirement accounts like IRAs and 401(k)s to allow you to name beneficiaries, some non-retirement accounts and bank accounts may not. While it has become more common in recent years, each financial institution has its own rules, so it is important to ask about beneficiary options when opening or reviewing any account. It is common for them to use terms like Transfer on Death (TOD) or Payable on Death (POD), which let you name someone to receive the assets directly when you pass. 6. Consolidate Accounts – Sometimes less is more, so consolidating accounts where it makes sense can simplify your financial life and reduce the chances of accounts falling through the cracks or mistakes being made. Just make sure you choose institutions that have beneficiary policies that are sufficient for your needs. 7. Coordinate With Your Estate Plan – After working with your attorney to create your estate plan, it is important to follow through on updating beneficiary designations and re-registering accounts as instructed. Failing to do so can result in outcomes that are not fully aligned with your intentions or may even contradict your wishes. 8. Speak To Your Financial Advisor – Whether you already have an estate plan or are just getting started, your financial advisor can play a valuable role. While they do not draft legal documents, they can work alongside your estate planning attorney to ensure your account registrations and beneficiary designations are aligned with your overall plan.
Taking the time to effectively manage your beneficiary designations may seem like a small detail, but it is not. It may be the greatest gift you give your loved ones during one of the most challenging times of their lives. By ensuring your assets are aligned with your estate plan, kept up to date, and clearly designated, you can spare your family from unnecessary stress, delays, and expenses. It is a simple but meaningful act of love that protects your legacy and brings peace of mind to your loved ones when it is needed most.
We understand that managing your beneficiary designations can feel overwhelming. The good news is you do not have to do it alone. We are here to help. As a StraightLine client, you also have access to Everplans, a secure digital platform that helps you organize, store, and share important documents and information related to your personal affairs, such as your estate plan, all in one accessible place. Don’t delay. Contact us today to review your estate plan, update your beneficiary designations, or explore how Everplans can simplify your planning. Together, we can help ensure your legacy is protected.
PROFESSIONAL DESIGNATION:
Certified Financial Planner Board of Standards Center for Financial Planning, Inc. owns and licenses the certification marks CFP®, CERTIFIED FINANCIAL PLANNER™, and CFP® (with plaque design) in the United States to Certified Financial Planner Board of Standards, Inc., which authorizes individuals who successfully complete the organization’s initial and ongoing certification requirements to use the certification marks. Those certification requirements include education, exam, experience and ethics components--more information is available at Professional Designations. DISCLOSURE: Information presented is for informational purposes only. StraightLine Group, LLC (“StraightLine”) is a registered investment adviser. Registration as an investment adviser does not imply a certain level of skill or training. Past performance is not indicative of future results. Investing involves risk, including the possibility of loss of principal. The ideas and opinions expressed herein do not constitute legal, tax, or investment advice or a recommendation of any particular security or strategy. Before making any investment decision, you should seek expert, professional advice and obtain information regarding the legal, fiscal, regulatory and foreign currency requirements for any investment according to the laws of your home country and place of residence. Any forward-looking statements or forecasts are based on assumptions and actual results may vary. Information presented from third parties is believed to be reliable, but no warranty is provided. StraightLine is not required to update information presented, unless otherwise required by applicable law. For more information about StraightLine, including our Form ADV Part 2A Brochure, please visit https://adviserinfo.sec.gov/firm/summary/127401 or contact us at 248-269-8366. Comments are closed.
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