Your Beneficiary Form Has a Job

It, it is, as always, and we're gonna open up with not only how we leave our money in terms of legacy, but well, to whom we leave our money, and in what way do we do that? We're talking about the beneficiary forms and really the job that your beneficiary form has.

Kelly, I mean, why should a beneficiary form get the same attention as wills and trusts?

Well, the IRS says that a beneficiary is the person or entity designated under the retirement plan or individual retirement account, IRA, and the procedures to receive the account after death.

So the data here we're looking at, the primary and contingent beneficiaries, the percentages, marital status, your births, your deaths, divorce, trust, charities, and account-by-account designation.

And this is why we often put IRA and 401k accounts, um, into one place because they're much easier to manage when you've got all these assets.

And, and many c- of our clients have 401ks and IRAs and SEPs and 457s and different kinds of retirement accounts.

Once they retire, it's ever so much easier to put them all in one place.

We put them all in one IRA, and then we have the beneficiary designations on that one account.

And maybe if you had a 401[k] that you had f- 20 years ago, and you were married at the time, and now you're not married now, maybe the ex-spouse is still on that 401[k] as a beneficiary.

This is why, again, we put everything in one account because now we have the designated beneficiaries that we actually want, and the money will go to where we n- uh, to we need it to when you pass on.

So we want to review these forms, and it is not morbid to do that.

And the simplest way to make sure a difficult future and creates less confusion for the ke- people you care about is to have these properly designated.

So investor.gov notes that transfer on death resi- uh, res- registration, excuse me, uh, can move eligible securities directly to named beneficiaries without probate.

So that's good, but you need to have your assets in a trust name for it to avoid probate outside of that.

So let's make sure we're actually looking at these and have the correct beneficiaries named in our different accounts and the trust documents or TOD accounts set up correctly as well.

Yeah, we wanna make sure we do it right, and, uh, and then it depends on who will be, uh, the recipient, the beneficiary.

Uh, what changes when the beneficiary is a spouse versus an adult child?

Yeah.

So the IRS rules generally give a surviving spouse more options than a non-spouse gen, uh, beneficiary, and generally, there's no taxes on a transfer from a spouse, uh, to-- well, that passes away to a oth- to the s- remaining spouse.

And a non-spouse beneficiary generally cannot treat an inherited traditional IRA as their own.

They-- while a spouse may have the rollover or inherited account choices depending on the situation.

So families do not need to memorize inherited account rules before a loss.

But what we're looking for is the beneficiary relationship, the owner, age of death, the required beginning date, account type, and whether the beneficiary qualifies as an eligible designated beneficiary.

So you wanna make sure you have this set up correctly and review it periodically.

This is why-I, when I do portfolio reviews for my clients, I generally always look at the designated beneficiaries for retirement accounts.