ARTICLE: The Importance of Updating Retirement Account Beneficiaries

The Importance of Updating Retirement Account Beneficiaries

Many people have forgotten or never updated the beneficiaries on their retirement accounts. If it has been a while since you checked your beneficiary designations you may discover that the person or entity you intended to benefit isn’t who or what you thought it would be, especially if you’ve gotten divorced, remarried, or had children since then. Updating beneficiaries ensures that one’s assets are distributed in a way they would want them to be. 

You should review your beneficiary designations once a year, but you should also update them as soon as there’s been a change in your life, such as a birth or a divorce. Most often when people review their beneficiary designations they keep everything the same except in cases involving divorce or remarriage, when a person may want to switch a former spouse to a current spouse. You should also update your beneficiary designations following the death of someone you named as a beneficiary to make sure their name is removed from accounts they were intended to inherit from. 

Changing beneficiaries is easy and it can be done on all types of retirement accounts, although there could be some limitations on IRAs or 401ks. You’ll need to fill out a beneficiary form which you should be able to get from your financial institution or retirement plan administrator. People are often surprised to learn that beneficiary forms don’t have to be filed anywhere (such as with the county or a court), but are simply written down or recorded by the owner’s financial institution.

It’s also important that you understand how your beneficiaries can inherit your IRA and other retirement accounts, such as 401k plans. One option that is often overlooked is creating a trust and designating that trust as your beneficiary. Naming a trust could allow you to provide financial support for your surviving spouse while ensuring that children from previous marriages are also provided for.

It’s also important to note that updating beneficiaries isn’t something only seniors should do after reaching a certain age or when someone gets sick, it’s something everyone should do as soon as possible no matter how healthy they are at the moment. In fact, updating beneficiary designations is something that is a part of the estate planning process here at Roth Elder Law, PLLC. We have learned that retirement plan assets and life insurance proceeds must be coordinated with your estate plan in order for the estate plan to work as designed. If you are not sure that your retirement plan beneficiaries are coordinated with your estate plan, call Roth Elder Law, PLLC today at (607) 962-6162 for a consultation.

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We at Roth Elder Law, PLLC, believe in providing services in a way that clients can easily understand and meaningfully participate in designing and maintaining their estate plan for their loved ones, as well as be assured that their plan will be administered according to their wishes.