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It's 2016: Do You Know Who Your Beneficiaries Are?

Julia A. Peloso-Barnes of Morgan Stanley Wealth Advisors
Julia A. Peloso-Barnes of Morgan Stanley Wealth Advisors Photo Credit: Contributed

NEW YORK -- When was the last time you checked your beneficiary designations for your individual retirement account (IRA), employer retirement plan, annuity or life insurance policy? If you haven’t examined it since the account was set up, you are not alone. But don’t hesitate.

Due to changing circumstances and shifting priorities, you may find that your named beneficiaries are no longer in keeping with your estate plan or wishes. If you have switched jobs, become a new parent, divorced or survived a spouse or a child, your current beneficiary designations may need to be updated.

Consider the "What If?"

In the heat and emotion of divorce proceedings, for example, the task of revising one's beneficiary designations can fall through the cracks. A court decree that ends a marriage also terminates the provisions of a will, but it does not automatically revise the beneficiary status of an employer-sponsored retirement account or an IRA. 

Some financial institutions, such as Morgan Stanley, automatically cancel the designation of a spouse as the beneficiary of an IRA in the case of divorce, but not all do. So, for example, if an IRA owner remarries and has a new family, but fails to change the beneficiaries on the account, the original beneficiary may have a legal claim to the assets in the event of death.

Also keep in mind that the law requires that a spouse be the primary beneficiary of a 401(k) or a profit sharing account, unless he or she waives that right in writing. A waiver may make sense in a second marriage if a new spouse is already financially set, and the children from the first marriage may need the money.

Steps to Stay Current

To ensure that your beneficiary designations are current and up-to-date, consider the following steps:

  • Make a list of all accounts that have named beneficiaries. This may include 401(k) plans, 403(b) plans, 457 plans, IRAs, pension plans, life insurance policies, annuities and bank accounts.
  • Contact the plan administrator or financial institution that maintains or services your account to verify your current beneficiary designations. You may want to do this with the help of your tax advisor or estate planning professional to ensure that these documents are in synch with other aspects of your estate plan.
  • Keep it safe. Store this list in a safe place with your other estate plan documents, such as your will, health care proxy and power of attorney, and make sure your designated executor has a copy.
  • Register for online access. If you do not already have online access to your accounts with beneficiary designations, consider registering so you can view and update your account information whenever you need to.
  • Consolidate. If you have changed jobs and left your assets in your former employers' plans, you may want to consider moving these assets into a rollover IRA. Consolidating multiple retirement plans into a single tax-advantaged account can make it easier to track your investment performance and streamline your records, including beneficiary designations.

Naming beneficiaries and keeping them up-to-date is only one important aspect of estate planning. Let me work with you to make sure your entire estate plan addresses your current wishes and circumstances.

If you’d like to learn more, please contact Julia A. Peloso-Barnes, CFP®, CPM®, ADPA®, CPRC®.

Article by Wealth Management Systems Inc. and provided courtesy of a Morgan Stanley Financial Advisor.

Tax laws are complex and subject to change. Morgan Stanley Smith Barney LLC (“Morgan Stanley”), its affiliates and Morgan Stanley Financial Advisors and Private Wealth Advisors do not provide tax or legal advice and are not “fiduciaries” (under the Internal Revenue Code or otherwise) with respect to the services or activities described herein except as otherwise provided in a written agreement with Morgan Stanley. Individuals are encouraged to consult their tax and legal advisors regarding any potential tax and related consequences of any investments made under an IRA.

The author(s) are not employees of Morgan Stanley Smith Barney LLC ("Morgan Stanley"). The opinions expressed by the authors are solely their own and do not necessarily reflect those of Morgan Stanley. The information and data in the article or publication has been obtained from sources outside of Morgan Stanley and Morgan Stanley makes no representations or guarantees as to the accuracy or completeness of information or data from sources outside of Morgan Stanley.

Neither the information provided nor any opinion expressed constitutes a solicitation by Morgan Stanley with respect to the purchase or sale of any security, investment, strategy or product that may be mentioned.

Morgan Stanley Financial Advisor(s) engaged Daily Voice to feature this article.

Julia A. Peloso-Barnes may only transact business in states where she is registered or excluded or exempted from registration 

Transacting business, follow-up and individualized responses involving either effecting or attempting to effect transactions in securities, or the rendering of personalized investment advice for compensation, will not be made to persons in states where Julia A. Peloso is not registered or excluded or exempt from registration.

© 2015 Morgan Stanley Smith Barney LLC. Member SIPC.

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