GUEST: Curt Whipple, CWS, CEP, Financial Advisor, Certified Wealth Strategist, Certified Estate Planner
C. Curtis Financial Group
41081 Ann Arbor Road
Plymouth, MI 48170
Frequently the press talks about updating your will or trust, but never about
the importance of keeping your beneficiary designations up to date.
For many people, their largest assets (life insurance, IRAs, 401K's or annuities, etc) pass according to their beneficiary designations rather than there will.
Some common problems that occur:
A young adult starts their first job. As part of their benefit package they get $50,000 of employer paid life insurance. As the young person fills out the paperwork in the HR department they list their boy/girlfriend as their beneficiary. They later get married to a different person, and forget about this life insurance. 20 years later they pass away and this asset passes to their old girlfriend of 20+ years ago rather than their spouse and children.
A married man with a wife and three children passes away and the surviving spouse quickly changes their will to make sure all of the assets will eventually go to their 3 children should she pass. They do nothing to the beneficiary designation of the now $200,000 IRA which only lists their first born child as the contingent beneficiary. Now Mom passes and that one child gets all the money as opposed to splitting it with all three children. Will that child do the right thing and share with the siblings? Will it destroy the relationship of the three kids?
A young couple purchases joint life insurance to help provide for their three young children should they both pass. Her brother is listed as the beneficiary with the intent that he will use the money to provide for the upbringing of the under age children. 20 years later the couple dies in a common car accident and the brother gets the life insurance money instead of their kids despite what the will says.
A single female takes a new job at age 30 and signs up for the company's 401K plan naming her twin sister as the beneficiary. Ten years later she gets married and lives happily for the next 20 years with her spouse until her age 60. Over the 30 years of employment she saves up over $1,000,000 in the 401K plan. She changes her will at the point she gets married and names her new husband as her sole beneficiary. At age 60 she dies and her twin sister gets the $1,000,000 as she never thought to check her beneficiary designations after initially signing up for the plan.
Other common errors:
· Not adding additional children as beneficiaries when born.
· Not removing deceased people as beneficiaries
· Not removing ex-spouses or ex inlaws as beneficiaries
· Not making "special arrangements " for dependents with "addiction" issues
· Not making "special arrangements" for dependents with special needs