Selecting Your Beneficiaries

by Stacy Francis, CFP®, CDFA

One of my best friends is going through a divorce. Over the phone last night, she provided an endearing account of her efforts to make a clean break and start over. Apparently, she even remembered to take her ex out of her will. This reminded me of something few people know, even though it affects most of us in one way or another.

Your will has no jurisdiction over accounts with beneficiaries, such as your IRA. Translation: no one will care about the changes you made to your will five years ago, designating your entire fortune to your sister. If your ex is listed as the beneficiary on your retirement account, he may very well walk away with all your money.

Now, before you break into a cold sweat, hear the good news! Most investment firms make changing your beneficiaries easier than changing a light bulb. Many provide a printable version of the form on their website. If this is not the case with your firm, the form is probably just a phone call away. Meaning: it is definitely worth the effort to review your beneficiaries periodically – especially when you are going through a lot of changes – and make sure everything is still as you wish.

Two other things to note: first of all, it is generally unwise (and an express ticket to probate) to select a minor as your beneficiary. If you want to ensure that a minor gets a portion of or all of your money, set up a trust. Secondly, it is usually smart to have a backup beneficiary, to keep things simple in case anything were to happen to your first choice.

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