Beneficiaries and the Importance of Yearly Reviews

Some may fastidiously plan the path they want their assets to take but not give their beneficiary information the attention it needs and deserves. Designating the appropriate beneficiaries is essential for proper asset planning. Investors should periodically re-visit this information to make certain it still follows their intentions. It may not be the most pleasant conversation topic, but it very well could be an important one. 

Benefits of Beneficiary Reviews

Manage assets. Nobody wants to spend their lifetime building wealth for it to end up paying taxes, penalties or going to the wrong person. Relationships may change. The person or people who were the beneficiaries selected before may not be the appropriate choice now. Annual beneficiary reviews may help ensure the assets do not pass to the wrong person.

It helps ensure the following of your wishes. Is there a particular person or way the individual wants their assets divided? Is a specific person entitled to the house, car or a lump sum payment? One way to help ensure the assets allocations go smoothly is by having a written plan. Investors should not leave the dividing of their assets to chance or hope that everyone acts appropriately.

What to Consider

The main consideration of a beneficiary review is to evaluate every asset, not just the accounts that hold the bulk of the person’s wealth. This review starts with a person’s last will and testament and any trusts established for the estate. The assessment may include an individual retirement account (IRA), 401 (k) retirement funds, pensions, insurance policies, annuities, stocks, mutual funds, real estate and personal property. Ensure the beneficiary information is up-to-date, accurate and complete for every item.

Things to Know

Every portfolio warrants a review. Some people may think, “I don’t need to worry about my beneficiaries because I don’t have enough money to matter.” Regardless of the size of a person’s holdings, it is still wise to review beneficiary information annually. Planning the distribution takes the burden off family and friends to ensure the correct person receives their inheritance, even if the amount is modest.

Ask questions. A beneficiary review is a perfect time to ask a trusted financial professional any questions on how to structure estate planning, set up trusts, distribute wealth to multiple heirs and other questions about estate planning. Educating yourself helps when managing your assets.

Each year, conducting a beneficiary review is a good habit to adopt. Doing so may help preserve a person’s assets, help make sure the person or people the investor designates receive their inheritance and may help with the burden of managing assets by the individual’s loved ones. Take the time at least once per year, or any time when there are material changes in circumstances, to talk with a financial professional and decide the appropriate beneficiaries for every asset.


Important Disclosures

The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual.

This information is not intended to be a substitute for specific individualized tax or legal advice. We suggest that you discuss your specific situation with a qualified tax or legal advisor.

LPL Financial Representatives offer access to Trust Services through The Private Trust Company N.A., an affiliate of LPL Financial.

This article was prepared by WriterAccess.

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