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The Greenway Gazette – Beneficiaries

Q4 2020

Ruminations from your Financial Advisor and Money Coach

As we are in the midst of the holiday season, beneficiaries are on my mind. You are gathering either in person or via Zoom with your loved ones. Odds are these loved ones are also the beneficiaries of your investment accounts and life insurance policies.

…Or are they?

…Are you sure?

When was the last time you checked?

During Annual Reviews with my clients, I make sure to confirm their beneficiaries. Unfortunately, for many people, beneficiaries are one item that often goes unchecked by their Financial Advisors.

I am passionate about Beneficiary Reviews because incorrect beneficiaries are one of the most common and potentially costly financial errors investors make. And these errors are totally avoidable! Not properly planning, or checking on, your beneficiary designations could mean your hard-earned money ends up in the wrong places.

How would you feel if your old 401k went to your ex-spouse?

Or if the beneficiary of your IRA is the brother you haven’t spoken to in 10 years?

Now that we have established the need to ensure your beneficiary designations are correct: Do your beneficiaries have the emotional or financial readiness? I’m sure the last thing you would want to happen to your life savings is for it to be blown in Vegas on a weekend getaway. Or another mistake is if your beneficiary is incapable of managing funds or is a minor. Setting up a lifetime trust may be a better solution to protect the assets while still making a portion of it available to the heir. Also, designating a contingent beneficiary is important in case your primary beneficiary predeceases you. There are tax consequences and income withdrawal strategies that beneficiaries must consider. For example, if your beneficiary is a high income earner, they could be pushed into an even higher tax bracket and put under undue burden. Do your beneficiaries have an advisor? We operate as a Financial Family Office and would be honored to work with your children or beneficiaries.

Being a beneficiary is a big deal. Hopefully your heirs are many, many years away before that role is given to them, but they should be prepared. It is entirely up to you, but I think it is important to let your loved ones, favorite charity, etc. know that they are your beneficiary. You don’t have to tell them how much money they may inherit, but they at least need to know who to go to in the event of your death.

So what now?

To avoid mistakes, I encourage you to follow the five steps I’ve outlined below.

And, as always, schedule a call with me if you need help.


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