A few weeks ago, my fiancé got an email from the custodian that holds his 401(k) reminding him to check his beneficiaries. While he was surprised to receive the reminder, he was also grateful, as he realized he had never named anyone as the beneficiary of his account. The importance of having a beneficiary is different for everyone. It was not something my fiancé considered when he first signed up for a retirement account; perhaps it slipped his mind or it didn’t seem as important at the time. But as his life has changed over the years, it was time to reexamine who he wanted to name for this role.
This situation reminds us that it’s important to take time to check your beneficiary information regularly. It only takes a few minutes and should be done every three to five years. It becomes easier to assign someone as your beneficiary; you no longer need to provide a social security number, but having as much information as possible is always beneficial in the long run, such as birth date, address, phone number, and email address.
Naming and updating your beneficiaries helps to make sure your money goes to the people you choose. Maybe you’ve been through a major life change such as a divorce, your ex-spouse may still be listed on your accounts as a beneficiary. Perhaps something less dramatic has happened and the charity you named as your beneficiary years before now doesn’t exist. And what if your primary beneficiary has predeceased you? If you’ve had a second child, you may not immediately think “we’ve got to add her to the IRA beneficiary list” but the reality is that if you don’t, the inheritance may not split evenly among your children as desired.
Life changes such as birth, marriage, and death are inevitable. No one likes to think about what would happen to their assets if they died unexpectedly, but it’s important to do so for the sake of your family and your own wishes. Without living beneficiaries, your assets can get transferred to your estate and state law determines who receives it. Under normal circumstances, the heirs named in your will would receive the proceeds, but by having beneficiaries assigned to your accounts, they can supersede your will. For example, if you name your best friend as beneficiary, forget to change the designation when your friend dies, and you later die, your friend’s spouse or children could claim the assets.
If you are a Schwab investor, here are some step-by-step instructions for how to manage your beneficiaries.
Designating beneficiaries for Schwab retirement accounts
To add or update your IRA beneficiaries online, log in at schwab.com and select your IRA account:
- Click on the Profile tab.
- Click Update Beneficiaries.
- Click the Add or Modify button.
Note: You will need the name and date of birth (if the beneficiary is a person) to add or modify your beneficiaries.
Designating beneficiaries for Schwab non-retirement accounts
Start by logging in at schwab.com:
- Click on Legal & Account Forms from the menu.
- Scroll down to Account Servicing Forms and select Designated Beneficiary Plan Application.
- Complete, sign, and return the Designated Beneficiary Plan Agreement.
If you invest through someone other than Schwab, reach out to their customer service or log into your online account to review beneficiary information. If you aren’t sure who should be named as your beneficiary on certain accounts, it’s time to have a frank conversation with your estate planning attorney and/or your financial advisor. As objective advisors with a fiduciary duty only to you, they can give input on who may or may not be a good choice to inherit your investments. They can also give advice about how to equitably name different beneficiaries, or even present the option of establishing a trust.
If you have questions about investment accounts and how to ensure they are managed properly when you are gone, contact Tull Financial Group at 757.436.1122. We’d be happy to help you find the right team of professionals, and ensure your hard-earned investments are distributed in the way you see fit.