Tell Your Beneficiaries About Your Accounts and Policies

Let them know how they will receive retirement assets and insurance benefits | May 16, 2016

Will your heirs receive their fair share of your wealth? When you are no longer here to oversee your assets, will they be distributed to your intended beneficiaries?

If you have a proper will or estate plan, you likely will answer “yes” to both of these questions. The beneficiary forms you filled out years ago for your IRA, your workplace retirement plan, and your life insurance policy may give you even more confidence about the eventual transfer of your wealth.

One item remains, though: You have to tell your heirs that these documents exist.

This does not mean sharing all of the details. If you have decided that some of your heirs will one day get more of your wealth than others, you can keep quiet about that decision. You do, however, want to tell your heirs the essential details. They should know that you have a will and/or an estate plan, and they should understand that you have named beneficiaries for your retirement accounts, investment accounts, and insurance policies.

Over time, you must review your beneficiary decisions. In fact, you should revisit them. For example, if you opened a retirement account in 1997, your life has probably changed quite a bit since then. Were you single then, and are you married now? Were you married then, and are you single now? Have you since become a parent? If you can answer “yes” to any of these three questions, then your beneficiary form surely warrants review today. Your choices may need to change.

Here is a quick look at how beneficiary decisions play out for a few of the most popular retirement accounts.

Employer-sponsored retirement plans. State law determines who an employer-sponsored deferred compensation plan may name as his or her beneficiary or beneficiaries (i.e., an individual, corporation/organization, trust and/or estate). Note that when it comes to pension plans, on the other hand, legally a spouse is the primary beneficiary of the account unless he or she waives this right in writing.

IRAs. With an IRA, a spouse does not have automatic beneficiary rights. The owner of a new IRA has the freedom to name anyone as the primary beneficiary.1

Life insurance policies. The death proceeds go to the named beneficiary; occasionally, a beneficiary may not know a policy exists.

Recently, 60 Minutes did an expose on the insurance industry. Major insurers had withheld more than $7.5 billion in life insurance death proceeds from beneficiaries. They had a contractual reason for doing so: The beneficiaries had never stepped forward to file claims.2

While many of the policies involved were valued at $10,000 or less, others were worth more than $1 million. The deceased policyholders had either failed to tell their heirs about the policies or misplaced the copies and the paperwork. Their heirs did not know (or know how) to claim the money. As a result, the insurance proceeds lay unclaimed for years, and the insurers only now feel pressure to pay out the benefits.2

Update your beneficiaries, and let your heirs know how vital these forms are. Make sure that your beneficiary decisions on retirement, brokerage and bank accounts, college savings plans, and life insurance policies suit your wealth transfer objectives.


1 – [4/21/16]

2 – [4/17/16]

This material was prepared by MarketingPro, Inc., and does not necessarily represent the views of the presenting party, nor their affiliates. This information has been derived from sources believed to be accurate. Please note – investing involves risk, and past performance is no guarantee of future results. The publisher is not engaged in rendering legal, accounting or other professional services. If assistance is needed, the reader is advised to engage the services of a competent professional. This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. This is neither a solicitation nor recommendation to purchase or sell any investment or insurance product or service, and should not be relied upon as such. All indices are unmanaged and are not illustrative of any particular investment.