Money Matters: Beneficiary review - worth the time and effort

When was the last time you made certain all of the beneficiary statements you have created are still appropriate? If you are like most of us, the answer is, “I am not sure when the last time I did a review.”

Before you launch into this project, you need to determine all of the different places you might have a beneficiary contract in place. Of course, the primary document is your Will. Many individuals use a Living Trust as the primary instruction document instead of the Will. In either case, once you are certain all of the provisions of either of these documents are still appropriate, you can move onto the remaining accounts, documents, and policies.

To assist your family should you pass away prematurely, it would be wise to make a listing of all of the outside accounts and policies. Included in this list should be the location of important papers such as policies or documents confirming changes to your accounts.

Life insurance is generally the second most common place where individuals have identified a beneficiary. Since life insurance policies can become very old and actually purchased decades prior to the eventual benefit payment, the policy can easily become lost or misplaced over the years. You should take the time now to locate these documents and file them in a safe place within your home, preferably a fireproof cabinet or lockbox. Over the years, the policy may now be serviced by a new company. You should also take time to confirm the contact information for the insurance carrier.

Additionally, you may find in your records policies you have dropped over the years. Once you are certain these policies are cancelled and are worthless, the old policies should be destroyed as to not be misleading to your heirs.

Retirement accounts are next in line. And again, there may be numerous accounts or plans that need to be updated. For some, you may now be working with your second or third employer. Each prior employer may still have a retirement or pension plan in place with obligations to you. You should take the time to contact each former employer to make certain there are not any plans in place you may not recall. If one exists, it may be time to consolidate the plan with current accounts, if it is permitted by the plan. If consolidation is not possible, then this is another benefit to be added to your master list and to make certain beneficiary information is up-to-date and correct.

Once you have checked with your former employers, then you should review each personal retirement account you have in place. This includes any SEP, IRA, Roth, 403b, or other types of retirement accounts. Each account has its own beneficiary information, so each one will need to be reviewed.

Other insurance policies such as annuities also have beneficiary statements. While these policies can be established as retirement accounts, they can also be non-qualified accounts. Policies such as disability or long-term care may also have a beneficiary statement for residual benefits. So, these need to be verified as well.

Bank accounts are another area where beneficiary contracts may exist. For older individuals, the use of informal trusts is very common. Examples of these are, POD (pay on death), TOD (transfer on death), ITF (in trust for) ATF (as trustee for). These are documents signed in conjunction with a bank or brokerage account. As they stipulate, upon the death of the accountholder or holders, the funds are to be for the benefit of the beneficiaries indicated on the forms. Most often, the account title will indicate whether the account is subject to one of these informal trusts by including the abbreviation.

Another way to automatically transfer ownership upon the death of one of the owners is by titling the account or property using specific instructions. One of the most common is Joint Tenants with Rights of Survivorship, sometimes abbreviated with JTWROS. This type of ownership transfers the decedent’s share to the remaining owners of the property. This type of registration is most common between spouses.

Once you have completed this review and are certain your records are now current and meeting your wishes, you should share of copy of the information with the attorney handling your estate plan as well as your financial advisor. Taking time now to make necessary corrections will assure your loved ones your wishes are being met. Errors in beneficiary documents can create significant expense and heartache if left undetected; and once a death has occurred, it may become irrevocable.

For additional information on estate or financial planning, investment management, life - health - disability - long term care insurance, or general financial questions, write to Doug Horn at Quality Financial Concepts.


Would you like a response to a financial question? Send your question to Doug Horn, 115 W. Broadway, Maryville, TN 37801. Be sure to mark your envelope Money Matters.

Doug Horn, CFP, is an area financial planner with more than 24 years financial experience and founder of Quality Financial Concepts, located in downtown Maryville on Broadway.

Doug Horn, CFP, Registered Investment Advisor in Tennessee and Texas and Registered Principal, Branch Office of and Securities offered through CUE Financial, Member FINRA, SIPC.

© 2008 All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

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