When was the last time you updated the beneficiary designations for your retirement plan? If it was too long ago to remember, then it could very easily be out of date. Retirement accounts are not part of our estate, but still require periodic attention and updating. Many people update their wills and estate plans but fail to update important beneficiary designations. Every year when reviewing your estate plan, you should also review your retirement plan beneficiary information to ensure it reflects your current interests.
One common misconception is that a retirement plan will be distributed according to your will. This notion is false- you must name a beneficiary yourself! Failure to do so could result in state or federal law taking control of your retirement plan benefits. Naming a beneficiary is the only way to ensure you have control of where your money ends up.
Additionally, if your estate exceeds the estate tax exclusion level, and if a large portion of the estate is retirement plans, then you may want to designate a trust as your beneficiary rather than a spouse. For the sake of avoiding tax issues, it’s worthwhile to consult with a living trust attorney.
Also make sure to keep your retirement plan up to date with any life changes, such as marriage and children. It’s important to keep the listed beneficiary consistent with your current life status. Also note that divorce does not automatically remove your ex-spouse from the plan!
Even without the occurrence of major life changes, it’s still necessary to review wills, estate plans, and retirement plans from time to time. For more information on how to update these documents, contact us and arrange a free consultation with Massachusetts Estate Planning Attorney Adam Tobin.