Content updated 2/22/24
- If you’ve gone through a divorce or remarriage, it’s important to be aware of how your beneficiary designations may be affected. Regulations vary by state; some automatically remove former spouses as beneficiaries while others do not. Consulting with an estate-planning attorney can clarify the laws applicable in your state.
- When you switch jobs and transfer your retirement plan, it’s crucial to ensure that your beneficiaries remain designated on the new account. Otherwise, they could lose their claim to those assets. Whether you’re moving funds to a new employer’s plan or an Individual Retirement Account (IRA), updating your beneficiary information is essential.
- If your primary beneficiary has passed away, it’s imperative to update your designation promptly. In such cases, any secondary beneficiaries named will move up to primary status. However, it’s wise to designate new secondary beneficiaries to avoid complications.
- Changes in ownership at financial institutions, such as banks or brokerages, can sometimes result in dropped beneficiary designations for older accounts. It’s advisable to review and update your beneficiary information after such transitions to ensure your wishes are properly documented.
- Welcoming a new child or grandchild into your family prompts the need for careful estate planning. Avoid designating minors as beneficiaries directly, as this could lead to the state appointing a conservator until the child reaches legal age. Instead, consider establishing a trust for the child’s benefit and naming the trust as the beneficiary. While this may involve some initial costs, it allows you to dictate the terms under which your child or grandchild accesses the funds.
- If a beneficiary becomes disabled, it’s crucial to adjust your designation to avoid jeopardizing their eligibility for government benefits like Social Security’s Supplemental Security Income (SSI). Creating a Special Needs Trust for the disabled individual and naming the trust as the beneficiary can safeguard their access to essential resources while ensuring your wishes are honored.