There are many occasions in life where people adopt a “set it and forget it” approach, from the straightforward act of setting up automatic payments for bills to more critical tasks like estate plans and beneficiary designations. While this approach is often beneficial, some tasks may hold greater importance for reevaluation than others.

Beneficiary designations are often forgotten after initial setup, but it is crucial to review them every few years or when you experience a significant life event. A mistake often made is presuming beneficiaries are current because you have a Will or Trust in place, which is not necessarily true. Some accounts, like an Individual Retirement Account (IRA), transfer according to their specific beneficiary designation form and not under the terms of Wills or Trusts. Beneficiaries are often individuals, but that does not have to be the case; account owners have the flexibility to designate a charity or trust, too. Regardless, naming and reviewing beneficiaries regularly as life circumstances evolve makes sure the owner’s wishes are met in the event of their passing.

Beyond ensuring assets go to their intended recipient, naming beneficiaries also expedites the transfer of funds to the beneficiary after the owner’s death. However, the absence of a designated beneficiary causes the assets to be subject to a lengthy and costly probate process before passing to the decedent’s estate or the surviving spouse. Below are some key accounts where it is important to keep these beneficiary designations current:

• Individual retirement accounts
• Employee sponsored retirement plans, including stock option and employee stock purchase plans
• Pension plans
• Bank accounts and taxable investment accounts with Transfer on Death or Payable on Death designations

• Individual policies
• Group life insurance through employer

Tax Implications: All the account types above carry different tax implications for beneficiaries. We recommend consulting with Aldrich Wealth and an estate planning attorney to discuss any estate plan and strategies you intend to implement.

Naming a Contingent Beneficiary: A contingent beneficiary is a secondary recipient designated to receive the benefits if the primary beneficiary is unable to. This situation may arise if the primary beneficiary passes away before or alongside the account holder or decides not to accept the assets.

Per Stirpes vs Per Capita: This is a designation referring to the method of distribution of assets.

• Per Stirpes is a Latin term translating to “by roots” or “by branch.” Thus, if a primary beneficiary passes away before the account owner, the per stirpes designation ensures the deceased beneficiary’s share is passed to their descendant(s) rather than being absorbed by the surviving beneficiaries.
• Per Capita refers to an equal share of assets. Thus, if three beneficiaries were named on an Individual Retirement Account, and one were to predecease the owner, the remaining two beneficiaries would split the assets.

Aldrich Wealth works closely with our clients, going beyond simply evaluating investment portfolios to thoroughly reviewing all aspects affecting clients’ financial health. This includes regularly reviewing beneficiary designations, ensuring they remain current and align with our clients’ wishes.