When you open an IRA or other retirement account, you will be asked to name beneficiaries to make clear who would receive your funds after you die. If you don’t name or regularly update your beneficiaries your funds could be disbursed in an unintended way. It is important to review your beneficiary designations often to determine if any changes need to be made.
It’s necessary that you designate beneficiaries because your retirement account provider will not accept the information unless formally submitted. Below are some additional tips that can help ensure that the right parties receive your retirement accounts.
- Maintain a beneficiary file to easily retrieve a list of all of your retirement accounts and beneficiaries listed. This will both help you to keep track of your current beneficiary designations, and help friends and family deal with formalities in the event of your death. If you prefer not to have your beneficiaries know about accounts while you are still alive, consider leaving instructions with your legal representative or a trusted individual to provide the information in the event of your death, or make other suitable notification arrangements.
- Review your beneficiaries after each life-event, including but not limited to any births, deaths, divorces, adoptions, marriages, or if your financial institutions change. For example, you may have named your mother as your beneficiary for your IRA after your first job. If you have since gotten married, you may want your spouse to be the beneficiary. If this isn’t formally changed, your mother will inherit the IRA when you die even though you may want your spouse to receive these funds.
- Review all account related documents as different retirement accounts may have different provisions for your beneficiaries. While your 401(k) plan document could provide that in the event of a divorce, your spouse is automatically removed as your beneficiary, your IRA may allow your former spouse to remain your beneficiary unless you update the beneficiary designation.
- You may be required to collect your spouse’s notarized consent if you want to name someone other than your spouse as a primary beneficiary of your retirement account.
Be sure to visit your participant dashboard if you haven’t updated your account information recently, or if you have had a change in circumstances to ensure your beneficiary information is up to date.