Linda P. EricksonLinda P. Erickson, CFP®, is the president of Erickson Advisors and a registered principal offering securities through Cetera Advisor Networks, LLC, 336-274-9403 lindae@ericksonadvisors.net.
There is an old story that moves around town about the ex-wife and her travels. It seems that when Mr. Right decided she was Mrs. Not-So-Right, he divorced her and married a younger, more vibrant companion. There was longstanding but silent bitterness between the women. After a few years Mr. Right died. Now Ms. Not-So-Right received a surprise and felt she should get back in touch with the new Mrs. Right. In fact, she sent her a beautiful postcard from every port of call as she sailed around the world using the proceeds of the life insurance Mr. Right had mistakenly left to her. He had neglected to change the death to benefit his new bride, the new Mrs. Right.
Is this a true story? I don’t know, but it illustrates an all too common fact that many people neglect to check their beneficiary designations following death, divorce, or any other changed family or personal circumstance. We recommend an annual Beneficiary Audit.
What should you check?
The following is an abbreviated list of the most important documents and accounts to be reviewed:
- Life insurance policies
- Annuities
- Pension and Profit Sharing Plans. This includes 401(k) and 403(b) accounts
- Transfer on Death or Payable on Death accounts that may be held at a mutual fund company or at the bank
- Income and Principal Beneficiaries as well as Trustees of all Revocable Trusts
What do you look for?
First, do you agree that the sum of money in question should still be payable to the person, charity or trust named? If not, do you want to split the legacy gift among a few more names, or do you want to name another charity?
Second, when you review your Revocable Trust, does it have any assets? That is, did you retitle the assets as the attorney told you to do? If yes, then review who you named as Trustee or Successor Trustee. Are these the names of family, friends, or a trust company who or which will carry out your wishes, or do you need to rethink who is named? Have any of those named died since you drafted the document?
Third, do you want to retain the named Health Care Power of Attorney and Durable (Financial) Power of Attorney? This is perhaps the most important review of all. These people will likely be caring for you in the end stage of your life. Are you sure you have made the right choice?
Many people believe the will takes care of telling who gets what. In today’s world that is often not the case; much of the wealth accumulating in a portfolio is held in accounts that will be distributed to the beneficiary, completely bypassing the will. Just as you regularly review your portfolio for performance, making adjustments as required, make a Beneficiary Review another regular part of your Wealth.