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Why beneficiary designations matter

Every few years it’s a good idea to review all beneficiary designations on financial documents

As we talk about legacy plans to transition your farm business to the next generation, let’s take a second for some financial housekeeping. Who is the designated beneficiary on your investments, retirement accounts and insurance? Are you sure?

Every retirement account and life insurance contract names a beneficiary. Many investment accounts can name beneficiaries and often as part of an estate plan, every account gets beneficiaries that match the overall plan.

Every few years, it’s a good idea to review all beneficiary designations to assure they are in order. Here are some things our clients commonly find when they check their beneficiaries:

•Children under age 18 are beneficiaries and no trust or financial custodian is named to hold the funds until the child reaches legal age to own a financial account.

•A former spouse is still beneficiary on life insurance or retirement accounts. This is ALWAYS a problem but it can be a HUGE problem when the insurance is expected to provide for important aspects of the estate plan but instead the money goes to somebody who is no longer a part of the family.

•Not having any beneficiary designations. While it’s standard for retirement accounts to have beneficiaries, sometimes it doesn’t get done. This means that should the account owner die, the account becomes part of the general estate and goes through probate before it goes to any heirs. Many times it also means that estate planning opportunities are lost.

•Failing to complete and confirm that the beneficiary designation form is on file with the account custodian. Often the beneficiary forms are very simple and sometimes you may want specific additional instructions. If that’s the case, you need to be sure that the custodian has those instructions and agrees, in writing, to honor them.

If this blog has got you thinking about your own situation, get in touch with my office (rdunn@dunncrekadvisors.com). 

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