Review your IRA, 401(k) beneficiaries

Long version

If you’ve had an IRA and a 401(k) for many years, you may occasionally ask yourself some questions: “Am I contributing enough?” “Am I still funding these accounts with the right mix of investments for my goals and risk tolerance?” But here’s one inquiry you might be overlooking: “Have I used the correct beneficiary designations?” And the answer you get is important.

It wouldn’t be surprising if you haven’t thought much about the beneficiary designation – after all, it was just something you once signed, possibly a long time ago. Is it really that big a deal?

It could be. For one thing, what if your family circumstances have changed since you named a beneficiary? If you’ve remarried, you may not want your former spouse to receive your IRA and 401(k) assets or the proceeds of your life insurance policy, for which you also named a beneficiary.

However, upon remarrying, many people do review their estate plans, including their wills, living trusts, durable powers of attorney and health care directives. If you’ve revised these documents, do you have to worry about the old beneficiary designations? You might be surprised to learn that these previous designations can supersede what’s in your updated will and other documents. The end result could be an “accidental” inheritance in which your retirement accounts and insurance proceeds could end up going to someone who is no longer in your life.

Furthermore, your retirement plans and insurance policy may not just require a single beneficiary – you may also be asked to name a contingent beneficiary, to whom assets will pass if the primary beneficiary has already died. As you can imagine, the situation could become quite muddled if stepchildren are involved in a remarriage.

To avoid these potential problems, make sure to review the beneficiary designations on all of your accounts at some point – and especially after a significant change in your family situation. If you see something that is outdated or incorrect, contact your retirement account administrator – or your insurance representative, in the case of life insurance – to request a change-of-beneficiary form.

And if you really want to be on the safe side, you may want to enlist a legal professional to help you with this review to make sure the beneficiary designations reflect your current family situation and are consistent with what’s in your estate plans.

In fact, if you’re already working with an experienced estate planning attorney – and you should – you might also pick up some other suggestions for dealing with beneficiaries. Just to name one, it’s generally not a good idea to name minor children as beneficiaries. Because children can’t control the assets until they become adults, a court would likely have to name a guardian – one that you might not have wanted. Instead, you could either name your own custodian to manage the assets designated to the minor or establish a trust for the benefit of the minor, which can distribute the money in several disbursements over a period of years – which is often a good move, since young adults aren’t always the best at managing large lump sums.

If you’re like many people, you have a strong desire to leave something behind. But you’ll want to do it in the right way. So, pay close attention to your beneficiary designations – when you first create them and throughout your life.

This article was written by Edward Jones for use by your local Edward Jones Financial Advisor.

Edward Jones Trust Company and Edward Jones, and their employees and financial advisors, are not estate planners and cannot provide tax or legal advice. You should consult your estate-planning attorney or qualified tax advisor regarding your situation.

Edward Jones, Member SIPC.

Number of words:  557

Short/radio version

PSA: Review your IRA, 401(k) beneficiaries

TBA: Aug. 9, 2021

When you opened your IRA and 401(k) accounts and your life insurance policy, you had to name a beneficiary. But have you checked to see if this designation is still up to date?

If your family situation has changed in some way, perhaps through remarriage, you may need to revisit the designations. Otherwise, you might create an accidental inheritance in which someone who is no longer in your life ends up receiving money from your retirement account or proceeds from your life insurance.

You might think you’ve already addressed this problem by updating your estate plans. But the beneficiary designation on your IRA, 401(k) and insurance can even supersede what’s in your will, living trust or other legal documents.

So, if you haven’t reviewed these designations in a while, try to do so in the near future. If you have to make changes, all you’ll need to do is fill out a change of beneficiary form.

When it comes to leaving assets behind to your loved ones, you’ll want to know exactly who is getting what – so stay current on your beneficiaries.

This content was provided by Edward Jones for use by (FA's NAME), your Edward Jones financial advisor at (Branch address or phone #).

Member SIPC

Number of words: 182 (excluding FA's name, address/phone number)