North Texas Dentistry Volume 9 Issue 5 2019 ISSUE 5 DE | Page 22

financial planning Naming a beneficiary is a routine step for several types of accounts. Doing so assures the balance will go to the desig- nated person when you die, or be divided as you wish among multiple people. Beneficiary designations are needed for life insurance policies, as well as annuities, retirement plans, and IRAs. This sounds like a simple matter, but it’s an area where many plans go awry. Here are some common pitfalls related to beneficiary designations. 1 Forgetting to turn in your beneficiary form or failing to update it when you get married, divorced or have children Updating beneficiary forms is a simple task, but it can easily be overlooked, especially if you hold accounts at multiple institutions. When your marital or family status changes, you may update your main accounts, but a small life insur- ance policy or a 401(k) at a previous employer may be for- gotten. Even if you’re pretty sure all your forms are up to date, I challenge you to create a file with copies of all of your current beneficiary designations. I’m willing to bet you will have at least one surprise. NAMING A BENEFICIARY Avoid 4 common pitfalls by Norma Spencer 22 NORTH TEXAS DENTISTRY | www.northtexasdentistry.com Once you assemble that file, it will be much easier to update all your accounts the next time without missing any. 2 Neglecting to name successive beneficiaries in case one predeceases you No one wants to think about it, but it’s best to be prepared. Be sure to name a secondary beneficiary in case your pri- mary beneficiary predeceases you. Also, consider when you name multiple beneficiaries how the assets will be distrib- uted if one of them predeceases you. This is often relevant when you name your adult children. For example: You name your two children, Sarah and James, as your primary beneficiaries on your IRA. Sarah and James each have two children. If James predeceases you, his portion will go to Sarah unless the beneficiary des- ignation specifies that James’ portion goes to his heirs (known as per stirpes). We often overlook this possibility because we don’t expect it to happen. 3 Creating an estate plan but not updating your beneficiary designations in accordance with the plan You can pass the assets in many types of accounts directly to your heirs simply by naming them as beneficiaries. But when you create an estate plan you may be trying to protect