Beneficiary forms should be examined after marriage or divorce of the account holder and any time there is a family birth or death, especially if a beneficiary dies.
Advisors say account-holders who fail make changes after a sole beneficiary’s unexpected death frequently cause beneficiary foul-ups.
“If you have no named beneficiaries, either because you never named them or your beneficiaries pre-decease you, your assets may pass to your estate or be forced to go through probate, which can be a very costly process,” said Michelle Brownstein, CFP, director of private client services at Personal Capital.
“Additionally, if your IRA ends up going to your estate, rather than a named beneficiary, the estate can be forced to withdraw funds and pay the tax on those withdrawals over a fairly short time period,” she added.
The high stakes mean beneficiaries should also be examined occasionally even when nothing has changed.
“It is prudent to periodically, every three to five years, check your beneficiary designations and see if anything should change,” said Travis Sollinger, CFP, senior vice president at Fort Pitt Capital Group.
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