Most people simply do not put the time and energy required into choosing beneficiaries, whether it is for a retirement account or something else.
But the choices you make about beneficiary designations now could impact the owner of an estate and their other beneficiaries for some time to come.
Why worry about beneficiaries?
Kiplinger discusses the oft-overlooked issue of beneficiary designations. First, understand that the will and probate process does not actually control all aspects of asset division and distribution. The beneficiary designation occurs outside of this process. A beneficiary’s choices potentially take precedence over the will and can change it.
Since this can include major aspects of the estate such as life insurance policies, major assets end up distributed to beneficiaries at an earlier point.
It is also common for people to lose track of all of their assets when planning their estate. This can include things like the retirement fund from an old job. If the person owning these accounts does not change the beneficiary before dying, then their assets could end up going to an unfavorable person, such as an ex-spouse.
How can you prevent this?
To prevent such situations from occurring, it is important to go over all potential accounts that have a beneficiary listed at least once every several years. Some experts imply that you should not wait longer than three years, while others suggest that up to five or even seven is a reasonable amount.
It can also help to have legal aid looking these documents and accounts over, too. Having extra eyes can help catch mistakes and can prevent someone from missing a crucial beneficiary that they wish to change.