Paul Durso: The Importance of Beneficiary Designations
Online, August 21, 2013 (Newswire.com) - Which is more important: having a will put together or properly filling out your beneficiary forms?
If I came to your home and asked you to show me a copy of your will, would you be able to? Most of you could probably show me the actual document or at least a secured copy that you keep locked away in a filing cabinet or fireproof safe. Now, what if I asked you to show me the beneficiary forms for your IRAs, 401(k) or other retirement accounts? Chances are, you've not paid as close of attention to your beneficiary forms as you have your will.
Properly filling out your beneficiary forms for your IRAs, 401k's and other retirement accounts and keeping them up-to-date are as important to your retirement plan as working is to your income.
Did you know that in almost every case, your beneficiary forms carry more weight than your will?
If the beneficiary you named is still living they will inherit the account, no matter what your will says. It's hard to believe that a small box on a routine form has more legal control over who gets what, than your will does. This could and sometimes does result in an accidental disinheritance of your spouse or family.
We've seen this before. One of the more notable cases involved a teacher in New York. She spent her life working for the state but when she landed the job at a young age, she wasn't married so she named her mother, and other family members as primary beneficiaries for her state pension account.
She married years later and by the time she passed away had accumulated more than $1 million in her state pension account. She had designated all of her assets to her husband within her will. The problem? When she married, she didn't change the beneficiary form for her pension and accidentally disinherited her husband.
Her mother had passed away but one of the family members she originally designated was still living and received the entire pension, leaving her husband with only their physical assets.
There are also issues to consider in the case that your spouse remarries and tax implications for naming your children and grandchildren as beneficiaries for your retirement accounts.
The lesson here is that beneficiary designations matter. Keep your beneficiary forms up-to-date and review them often especially in the case that there is a major life event (birth, death, marriage, divorce, adoption, etc.).
You have one chance to get it right; don't let your death disinherit the ones you love.
About the Author
Paul Durso is the president and founder of Durso Capital Management http://www.dursocapital.com, a retirement and estate planning firm in Charlotte, NC. Durso is a Certified Estate Planner (CEP®) by the National Institute of Certified Estate Planners, a Certified Wealth Strategist (CWS®) by the Cannon Financial Institute, and a Certified Retirement Planner.
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