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