Every year, we force… *ahem*… hold our Members accountable to reviewing their beneficiaries.
Usually, this is accompanied by some minor whining because “we just checked them last year.” And yet, every single year, we uncover things we weren’t expecting:
– A 401(k) changed custodians and dropped the data.
– Last year’s update was never actually submitted by the provider.
– Life just happened.
So, every year, we check them again. For the Schwab accounts we manage, we do the heavy lifting for them (#membershiphasitsprivileges).
For everything else, we hop on a screen share to review the rest of the web:
– Current 401(k)s
– HSAs
– Personal Life Insurance
– Employer-provided Life Insurance
– IRAs (unless you’re an FZ Member, then we’ve got you covered)
If you are doing this yourself today, here are the absolute rules of thumb:
– Always have a backup. Make sure you have a Primary and a Contingent (sometimes called secondary) beneficiary listed for every account.
– If you have a trust with minors: Add your spouse as the Primary and the trust as the Contingent beneficiary.
– If you have a trust with financially mature adults: List the adults outright as the Contingent beneficiaries, NOT the trust. Leaving money to adults through a trust instead of directly will force them to pay unnecessary taxes.
A True Story (You may have heard me tell this one before):
A very wealthy older man got divorced when he was young and broke. He remarried a year later and spent 50 loving years with his second wife, raising three kids together.
When he passed away, his ex-wife got all of his money because he had never updated his beneficiaries.
His family took it to court, but the judge ruled that the beneficiary form overrules any assumed intentions—and even overrules a will.
The lesson: Don’t accidentally give your ex-wife all your money.
Review your beneficiaries today!