Updating Beneficiary Designations: Why It Matters

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Welcome to March, where tax season is in full swing, and we’re gathering all the documentation needed to prepare for The Big Event: April 15th.

While tax season weighs on all of us, it’s particularly challenging this year, given significant changes to the tax code.

Don’t worry. We’re not going to delve into that right now. That’s a conversation for another time.

Instead, let this time of year remind you to do one simple, yet crucial thing.

Update your beneficiaries on all your financial accounts.

There’s a great saying that there are two certainties in life: death and taxes, but the third constant is often overlooked: change.

There are joyful life events like marriage, the birth or adoption of a child, and career shifts that bring more fulfillment and more money.

And then there are the not-so-happy ones: death, divorce, or unexpected job loss.

As your life changes, so do your plans, policies, and designations. But you may not think to keep up with them, which can lead to an unintended result. Consider the following scenarios:

Listing parents as beneficiaries: When you started your career, you may have listed your parents as your beneficiaries on an insurance policy or investment account. A noble act, but if it’s been a few years (or decades) since your first job, you may want to change that person to your spouse or domestic partner. Otherwise, your benefit payments will go to your parents, not your beloved husband or wife.

Divorce and remarriage: Let’s face it, not every marriage lasts. If you remarry and don’t update financial accounts to designate your current spouse as the beneficiary, your prior spouse could inherit your funds.

Neglecting to List a Beneficiary: Sometimes, in haste, we transfer accounts and think, “I’ll get to the beneficiary information later.” Well, later is now. Otherwise, your assets will likely be held in probate if you don’t designate a beneficiary for a retirement account like a 401(k). A court will sort out your financial situation and determine how to distribute your assets.

And to add insult to injury, once the account is probated, your loved ones could find themselves with a tax liability instead of an inheritance.

None of these is the legacy you want to leave behind.

In short, if you want your wishes to be honored, make sure your wishes are updated.

What is the simplest way to do so? Fill out a new beneficiary form for each of your investment accounts.

If you need guidance in finding, changing, or obtaining beneficiary forms or selecting appropriate beneficiaries, Kaspian Group is here to help. Contact us at kwesi@kaspiangroupinc.com to begin the process today.

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