When Did You Last Check Your Beneficiary Designations?

I think we can all agree that memory is an easily influenced contraption. Too often we rely on what we know about ourselves and our current surroundings in concluding what our past decisions may have been. Or, over time, the memory of what we should have decided in retrospect takes the place of what really happened. This trick of our memory to adapt and to change is painfully highlighted when I talk to clients about beneficiary designations for their retirement benefits and life insurance policies. Honestly, even having seen this trick first hand, I’ve tricked myself.

It must be said that I am the oldest child of a litter of children. My father has been known to joke that he has a baseball team, complete with the lefty to play first base. And we have always been a team, not one sibling more important than the other. If someone asked me last year who the beneficiary of my retirement account was, I would have confidently sworn that I listed my better half in life. The thought of my siblings, especially just one of my siblings, would not have crossed my mind as a choice.

Earlier this year, I decided that I would take the advice I give to all my clients and actually look at my beneficiary designation on my retirement accounts. It turns out that one of the accounts listed one of my middle sisters as the sole beneficiary. I was baffled. Even if I was going to choose my siblings as my beneficiaries, how had I chosen just one?

Some years ago, I was transferring my retirement account to a new brokerage house. At the time I was doing this paperwork, one of my younger sisters was in a serious-then-hilarious-now accident. As I looked at my signature from seven years ago, I realized that as I had been filling out the paperwork and in a moment of despair for my then bedridden sister, I had somehow believed that she would be helped if she inherited my anemic retirement account. The fact that I would have to die and, even then, there would be restrictions on how and when she could use the money never really entered my mind. I was just sad for her and she was far away. How I thought this was helpful to her, I will never truly know.

As aware as I was of the importance of checking your beneficiary designations before this, I am now hyper-diligent. If you take nothing else away from this, know that these designations on your life insurance and retirement accounts beat the terms of your will. Often, clients will tell me that they have recently changed their will, but not their beneficiary designations, somehow forgetting this important fact. If I listed my sister on my retirement account as the beneficiary, but my husband as the beneficiary to my will, my sister wins that account.

Beneficiary designations are an important part of your estate plan; arguably as important as the will itself. Every three to five years, go ahead and just look to see if you have tricked yourself. If you are using an IRA for charitable gifting, make sure it’s still a charity in existence. As amusing as it seems, make sure your current spouse is the one listed as the beneficiary. And please, everyone, stop listing minor children as beneficiaries to your accounts. If you want to benefit minor children, there is a much less costly way to do it, and you need to talk with an estate planning attorney. But, most of all, do not rely on your memory.

Phone: (919) 402-1740

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Email: assistant@tillmanfirm.com

Office: 501 Eastowne Drive, Suite 130,
Chapel Hill, NC  27514-6224