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Practical Planning Tip: Year-end planning - Reviewing your beneficiary designations

December 07, 2023

Today’s year-end planning tip will cover Review your beneficiary designations.

Retirement accounts and insurance policies have beneficiary designations that pass OUTSIDE of one’s will. Therefore, even if you did estate planning, it’s important to review your various beneficiary designations to ensure that your money is passing according to your wishes.

Changing family dynamics: Did a family member who was a beneficiary on your account pass away this year? Did you want to alter beneficiaries because your family dynamics have changed? Be sure to reach out to your advisor to update them on your situation and discuss best practices.

The example I always give is regarding an ex-spouse inheriting your assets. It is not unheard of for monies to pass to someone you don’t want like an ex-spouse, if you never properly updated your beneficiary designations. It’s worth reviewing your beneficiaries once a year to ensure something like this does NOT happen.

Planning Tip that is tangentially related: In late 2019, Congress passed the SECURE Act, which eliminates the “stretch” option on distributions from inherited retirement accounts. Under the new rules, most non-spouse beneficiaries are required to fully distribute inherited account balances by the end of the 10th year following the year the account owner dies. Conducting annual beneficiary reviews is a great way to IDENTIFY clients whose estate plans have been impacted by this change, and it may prompt discussions with clients and their heirs around efficient wealth transfer strategies, for example, utilizing a charitable remainder trust to replicate the benefits of the now defunct “stretch IRA.”

You can watch the FULL video here.