Who are your beneficiaries? If you have assets such as 401(k) retirement accounts, IRAs or life insurance, you should know. Naming a beneficiary is an important part of retirement planning because it allows the transfer of key assets directly to your heirs, without probate. The problem? People often name beneficiaries when they first establish retirement accounts – and fail to update them over time.
Failing to update your beneficiaries as your circumstances change can create some huge financial problems. For example, someone who opened a 401(k) when they were a young adult and still living at home could still have their parents listed as a beneficiary, even though they are now married. If that person died, their parents would get the 401(k) money even if their spouse is the sole beneficiary in their will. Or an ex-spouse could be listed as a beneficiary – and get all the money in a retirement account – even though the account holder has since remarried. There have been numerous nasty lawsuits nationwide involving outdated beneficiaries. In some cases, a child is inadvertently left out because they were born after beneficiaries were named.
Failing to update your beneficiaries is one of the top money mistakes families make, according to this recent report. Take a few minutes to make sure your beneficiary designations are up to date. You – and your heirs – will be glad you did.