When you sign up for an IRA, 401k, TSP, 403b, etc. (“Qualified Funds”), you are required to designate a beneficiary to receive the proceeds should you pass away. Often, people fill out the forms without giving much thought to it. However, qualified funds are not governed by your Will or Living Trust, so it is important to coordinate your beneficiary designations with your estate plan. For instance, if the beneficiary listed on a retirement account is a young person or a person with special needs, you likely want the funds to be held in trust for them upon your death. To accomplish this, you need to have a trust provision in your Will to which you can direct the Qualified Funds.
Once you’ve designated beneficiaries for your qualified funds, remember to review them regularly and update them if necessary. Changing the beneficiary of a retirement plan, IRA, life insurance policy, or other benefit must be done by using the plan’s official beneficiary form. Failure to update can, for example, lead to an ex-spouse receiving the funds or lead to the exclusion of a child who was born after you designated beneficiaries. Although everyone gets busy with life’s daily demands, it is important to take time to review your beneficiary designations, make sure they coordinate with your estate plan, and update them if they don’t.