6 Reasons to Update Beneficiary Designations

As noted in the December 16^th Forbes article by Harper Willis, here are six reasons you might need to update your beneficiary designations:

1. You got divorced or remarried. Some states automatically eliminate former spouses as beneficiaries; others don’t. Check with an estate-planning attorney to find out the law in your state.

2. You changed jobs and rolled over your retirement plan. When you move money from your former employer’s retirement plan into your new one or into an IRA, your beneficiaries lose any claim to those assets. So you’ll want to ensure they’re named as beneficiaries on the new account.

3. Your primary beneficiary died. In this case, you’ll absolutely need to update your designation. If you had also named a secondary beneficiary, he or she will move up to primary status, but you’ll now want to name a new secondary, just in case.

4. Your financial institution changed ownership. These days, when banks, brokerages or mutual funds merge, they sometimes drop the beneficiary designations for older accounts.

5. You had a child or grandchild. One caution, here: Don’t designate a minor (a child under 18 or 21, depending on your state) as a beneficiary. If you do, the state will appoint a conservator of assets until the child comes of age.

Instead, if you want this child to inherit your financial assets, create a trust for his or her benefit and name the trust as the beneficiary. (This might cost around $1,000 or so.) That way you control the terms under which your child or grandchild has access to the funds.

6. Your beneficiary became disabled. In this case, you’ll need to amend the designation or risk jeopardizing the beneficiary’s eligibility for Social Security’s Supplemental Security Income (SSI) benefits. The SSI program provides income and Medicaid insurance to disabled people with less than $2,000 ($3,000 for a couple) in what are known as “countable resources.”

Set up a Special Needs Trust for the benefit of the disabled person and designate the trust as the beneficiary on your accounts.