The Uber Importance of Reviewing Your Beneficiary Designations

Today I want to stress why it is so important to review the beneficiary designation forms on your individual retirement accounts, your life insurance policies, and even your 401K at your present job.

Don’t think reviewing your beneficiaries is a big deal?

Let me share a quick story of why that is so important and how one little oversight can make a huge difference for your family.  In this case, an $80,000 difference!

Several years ago I was conducting a first meeting with a  potential new client. The man had come in because he had inherited some money from his recently deceased mother. He was a brother of three, and was sharing with me the details of the inheritance. We started talking about that and then the story really came out about what had happen and what ripped their family apart.

Review Your Beneficiaries: Trust Me!

Their mother had a decent amount of money and it was spread out among a few different places. She had some at the bank. She had some in her IRA, and she also had some in an annuity. Whenever she set up all her beneficiary info her intent was to make sure that all of it went equally to her three sons. She even set up her will to where it would be divided into three equal parts.

She just assumed that everything was okay.

Her IRA was fine. Her checking and savings accounts were fine. Her CDs at the local bank were fine. The only thing that she overlooked was the annuity. She had listed her oldest son as the primary and only beneficiary of the annuity.

Now if you didn’t know this, even if you have a will and it says you want it to go into three equal parts to whomever, the beneficiary designation on that annuity overrides that. So it doesn’t matter. She just overlooked it.  Her oldest son was the executor of the will so I’m sure she just thought that the will would take care of it.

Splitting Heirs

One would conclude that even though the will said that it was to be split three different ways that oldest brother would just do what mom wanted and to split it evenly. Right? Well, he didn’t. He ended up taking all of that money to himself.

Now it probably wouldn’t have been as big a deal, but on the total dollar amount that the mom had in her entire estate with everything added up together, that annuity represented 75% of her entire estate to the tune of $240,000. The brothers split everything else in three equal parts, but the annuity; that brother kept it all for himself.

It was such a large chunk of money he actually took that money and bought an airplane with it. I kid you not. Was he a pilot? No. Did he know how to fly? No. It was a hobby that he wanted to get into so instead of splitting that money with his two remaining brothers he used that to buy an airplane.

Did you catch that? An airplane.

I wish I was making this story up. It is the absolute truth and is just another reminder of why it is so important to review your beneficiaries. Remember that applies to more than just annuities. That also goes to life insurance policies, your 401K at work and your IRA’s.

Can Happen to The Best of Us

One thing that I almost did before I was deployed to Iraq; I had just recently got married to my wife and prior to me getting married I had both my mom and my dad as my primary beneficiaries on my life insurance policies. Had I not made that important change and something happened to me, that all would have went to them and left my wife with nothing.

I would like to think that my parents would have done the right thing, but I tell you what; anytime you put a big chunk of money in front of somebody that has a lot of zeros behind it you never know how they are going to act. You always want to be hopeful that they will act in the best interest, but you never know. That is why it is so important to review your beneficiaries.

Take 20

If you haven’t reviewed those in a while…. take a look. It takes maybe 15-20 minutes to check everything. Just jot all the things down that could have a beneficiary designation on there to make sure that you’ve reviewed it and that it is as current as you need it to be, to make sure the right people are on there.

Do not pass go, go check your beneficiaries today and make sure that you’re all up to date.


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