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Beneficiaries and the Importance of Yearly Reviews

Beneficiaries and the Importance of Yearly Reviews

January 20, 2022

Many clients may fastidiously plan the path they want their assets to take, but not give their beneficiary information the attention it needs and deserves. Designating the best beneficiaries is essential for proper asset planning, and investors should periodically re-visit this information to make certain it still meets their needs. It's not the most pleasant conversation topic, but it very well could be the most important one of the year. 

Benefits of Beneficiary Reviews

Preserve assets. Nobody wants to spend their lifetime building wealth for it to end up paid out to taxes, penalties, or to the wrong person. Additionally, relationships change and the person or people who were the beneficiaries at the beginning may not be the best or wisest choice now. Annual beneficiary reviews can help decrease the risk of assets ending up out of the hands of the person they were meant for.

Helps ensure wishes are carried out. Is there a particular person or way the individual wants their assets split up? Is a specific person entitled to the house, car, or a lump sum payment? The only way to make sure it's done that way is by having it in writing. Investors shouldn't leave the doling of their assets to chance or to the hope that everyone "does the right thing."

What to Consider

The main consideration of a beneficiary review is to review every asset, not just the accounts that hold the bulk of the person's wealth. This includes a person's retirement account, rollover IRAs from previous jobs, insurance policies, annuities, stocks, mutual funds, and personal property. And, of course, the person's wills and/or trusts. Make sure the beneficiary information is up-to-date and all the information is accurate and complete on every account. 

Things to Know

A review is smart no matter how much, or little, the portfolio. Some people think "I don't need to worry about my beneficiaries, because I don't have enough money to matter." Regardless of the size of the person's holdings, it's still smart to review beneficiary information on an annual basis. Planning the distribution takes the burden off family and friends, and makes sure the right person receives the inheritance even if it isn't seven figures. 

Ask questions. A beneficiary review is a perfect time to ask a trusted financial professional questions on how to structure estate planning, set up trusts, dole out wealth to multiple heirs, and other questions that may have fallen through the cracks. Educating oneself is one of the most common ways to manage, control, and protect assets.

Conducting a beneficiary review on an annual basis is a smart best practice and a good habit to adopt. Doing so helps preserve a person's assets, helps make sure the person or people the investor designates receives the inheritance, and helps take the burden of splitting assets off the individual's loved ones. Take the time this year to sit down with a financial professional and hash out the best beneficiaries for every asset. 

Important Disclosures: The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual.

The information provided is not intended to be a substitute for specific individualized tax planning or legal advice. We suggest that you consult with a qualified tax or legal advisor.

LPL Financial Representatives offer access to Trust Services through The Private Trust Company N.A., an affiliate of LPL Financial.

LPL Tracking # 1-05200480

Content provider: WriterAccess