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The Importance of Beneficiary Designations

By:  Mary McCraw, CFP®

A well-crafted estate plan can ensure that your wishes are carried out with minimal hassles for your heirs.  People spend a lot of time and money putting an estate plan in place and often overlook an essential element: beneficiary designations.  Often, these are set-up when an account is first opened but never looked at again. 

Just like an estate plan, beneficiary designations should be reviewed after major life events.  Marriage, death, divorce, birth in the family or an updated estate plan are all reasons to take a fresh look.  Even without major life changes, it is good practice to review both your estate plan and beneficiary designations every 5 to 10 years. 

Which Accounts Need Beneficiary Designations

Most commonly, qualified retirement accounts and life insurance policies pass by beneficiary designation.  Any account which is solely in your name should have a beneficiary designated as well.  This includes checking, savings and investment accounts that are individually owned.  Banks typically refer to these designations as “transfer on death” (TOD) or “payable on death” (POD).  Another important bank item is a safe deposit box.  While beneficiary designations are not available for these boxes, it is important that you have at least one other person (typically your spouse or named Executor) on the box to ensure it can be accessed in the event of your incapacity or death.

Naming Beneficiaries

Who you name as beneficiary on an account will depend on your situation and goals.  We recommend consulting with an attorney to ensure that your designations align with your estate plan.  This is especially true if qualified retirement plans or life insurance represents the bulk of your estate.  We recommend naming a contingent beneficiary in the event your primary beneficiary predeceases you to avoid proceeds being paid to your estate.

Housekeeping Items

We recommend maintaining copies of all beneficiary forms in your files as well as confirmations that they have been processed.  If you do not receive a confirmation, we recommend contacting the company to confirm they received the request and the change has been processed.  Sometimes, the current beneficiary will be displayed in the online access for the account – making it easy to verify.  We also request you forward a copy of any changes to us, so that we can keep your file up to date. 

Beneficiary designations control the disposition of the account or policy it is associated with, regardless of what the will or trust says.  Therefore, it is crucial that these be complete, valid and coordinated with your overall estate plan.  In summary, a little time ensuring your beneficiaries are in order now can save loved ones big headaches down the road.

IMPORTANT DISCLOSURE INFORMATION

Please remember that past performance may not be indicative of future results. Different types of investments involve varying degrees of risk, and there can be no assurance that the future performance of any specific investment, investment strategy, or product (including the investments and/or investment strategies recommended or undertaken by The Arkansas Financial Group, Inc.-“AFG”), or any non-investment related content, made reference to directly or indirectly in this blog will be profitable, equal any corresponding indicated historical performance level(s), be suitable for your portfolio or individual situation, or prove successful. Due to various factors, including changing market conditions and/or applicable laws, the content may no longer be reflective of current opinions or positions. Moreover, you should not assume that any discussion or information contained in this blog serves as the receipt of, or as a substitute for, personalized investment advice from AFG. Please remember that if you are a AFG client, it remains your responsibility to advise AFG, in writing, if there are any changes in your personal/financial situation or investment objectives for the purpose of reviewing/evaluating/revising our previous recommendations and/or services, or if you would like to impose, add, or to modify any reasonable restrictions to our investment advisory services. To the extent that a reader has any questions regarding the applicability of any specific issue discussed above to his/her individual situation, he/she is encouraged to consult with the professional advisor of his/her choosing. AFG is neither a law firm nor a certified public accounting firm and no portion of the blog content should be construed as legal or accounting advice. A copy of the AFG’s current written disclosure Brochure discussing our advisory services and fees is available for review upon request. Please Note: AFG does not make any representations or warranties as to the accuracy, timeliness, suitability, completeness, or relevance of any information prepared by any unaffiliated third party, whether linked to AFG’s web site or blog or incorporated herein, and takes no responsibility for any such content. All such information is provided solely for convenience purposes only and all users thereof should be guided accordingly.

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