Checking Your Beneficiaries

March 3, 2009
Special Feature

If you have a will, you’re ahead in the estate planning game. But it’s a common misconception that all your assets will be distributed according to the terms of your will when you die.

If you have a will, you’re ahead in the estate planning game. But it’s a common misconception that all your assets will be distributed according to the terms of your will when you die. When it comes to the cash in your IRAs and 401(k) plans, or the proceeds of your life insurance policies, that just isn’t true. That money will go to the beneficiaries you name on the account or the policy, regardless of what your will says.

That’s why it’s important, say estate planning gurus, to check the beneficiaries in your retirement accounts, especially after major life-changing events like marriage or divorce. You may write your ex-spouse out of your will, for example, but he or she will still get the cash in your IRA unless you change the account’s beneficiary. You should also make sure that you do name a beneficiary and not leave that line blank. Otherwise, the account goes to probate court and the court will decide who gets the assets.

Other beneficiary tips: Name a secondary beneficiary in case the primary beneficiary dies. Doing this also gives the primary beneficiary a chance to file what’s known as a qualified disclaimer, which allows the assets to pass to the secondary beneficiary without incurring gift taxes. Also, don’t name a minor as a beneficiary unless you want the account to end up in probate court, which, in most states, must supervise the distribution of assets to minors.