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“Thanks for the retirement account. xoxo, Uncle Sam”

Updated: Feb 2, 2023

“Say whaaat?!”

You might ask, if you weren’t already six feet under. It’s exactly what your loved ones will ask if you haven’t taken the very important step of naming beneficiaries to ALL of your accounts. All of them, from Retirement accounts, personal investment accounts, savings accounts, checking accounts to work provided life/death insurance. Though a spouse may still inherit accounts if not named as a beneficiary, it could require a long drawn battle in court accompanied by hefty fees.

When it comes to naming beneficiaries, the common ones are a sole beneficiary, multiple beneficiaries with varying percentages, and a primary beneficiary with alternate beneficiaries.

Below are some things to consider, but your best move is to consult with your HR/Benefits representative or a lawyer.

Retirement and Personal Investment Accounts

At the time of initial setup, you are asked a ton of questions including who you want the beneficiaries of the account to be. At that time, you may have put the first name that came to mind (e.g. Mom!), but now that you’ve had time to reflect, who should you list as a beneficiary? It’s really up to you, but note that if you are married and do not want to name your spouse as a beneficiary, you may need their written consent. Find out the laws in your state regarding this.

You can change your beneficiaries at any time. Visit the website of the brokerage firm managing the account in question, and you can usually find the options under ‘Profile’. You can also call your HR/Benefits department at work or the brokerage firm’s customer service department for assistance.

There are benefits to naming a spouse as your sole beneficiary. According to a legal website, “A surviving spouse who is the sole beneficiary has more flexibility about what to do with the money than do other beneficiaries. Unlike other beneficiaries, a surviving spouse, in some cases, can keep all the money tax-deferred at least for a while. (This isn’t a concern with the Roth IRA, because withdrawals generally aren’t taxed.)”

Savings/checking Accounts

Your bank usually defaults the beneficiary to your spouse or partner if it’s a joint account, and if it is not a joint account, you have to specify a beneficiary. You can normally do this through your bank’s website, but some banks require that you make the changes in person. Some banks also limit the number of beneficiaries. Call your bank to find out the right steps to take.

Work Life Insurance, and other death benefits

Most employers have a beneficiary listed on file for you (normally collected when you first start working there), and that person is the one that receives the life insurance or any other benefit provided by the employer. Each employer has a different way of collecting, storing and changing that information. Call your HR or Benefits department for more information, and to ensure you have the correct information on file.

Key Takeaways

  1. If applicable, name a spouse as your sole beneficiary. It makes things less complicated and has some added benefits.

  2. Naming alternate beneficiaries is a great idea in the event that the primary beneficiary passes away too.

  3. Be sure to update your beneficiaries list if there is a major change in your life.

  4. CONSULT with your HR department or a lawyer for the options that best suit your situation.

You’ve worked really hard to save and invest your money. Don’t let all that hard work end up lining the government’s pocket. Name your beneficiaries today!

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