Once you have planned your estate, you need to keep updating your retirement account beneficiaries if you want your estate to go to the right people. Even if you have the best plan, your assets can end up in the wrong hands if you fail to update your beneficiary's designations. Although you can change your beneficiaries at any time, it becomes necessary if the following circumstances apply:
A Beneficiary Becomes Disabled
Leaving your disabled loved one as a beneficiary may deny them income from means-tested entitlement programs. For example, Supplemental Security Income (SSI) is only available to those who live below certain incomes. The assets you bequeath to such a beneficiary may raise their income above the threshold and deny them the SSI benefits. In such a case, it may be prudent to delete the disabled beneficiary and instead create a special needs trust account for them. Such a trust would allow the beneficiary to continue benefiting from the means-tested entitlement programs.
Also, if one of the beneficiaries becomes disabled, they may not be able to manage the account you left for them. For example, a beneficiary who gets injured in an accident and has to live with impaired cognitive functions may not be able to manage their account. Therefore, it might be a good idea to name a trustee to manage the account on behalf of the beneficiary with special needs.
There is a Change in Your Marital Status
A change in marital status usually means an increase or decrease in the number of people you wish to benefit from your estate after your demise. For example, when you marry, your spouse becomes the primary beneficiary of your estate. If your new spouse has a kid from a previous relationship, you may also wish to include them in your list of beneficiaries.
At the same time, you need to update your beneficiary designations after divorce if you don't want your former spouse to inherit your estate. Merely updating your will isn't enough because the (Individual Retirement Account) IRA beneficiary form overrides the will.
You Have Rolled Over Your Retirement Plans
A retirement plan rollover means moving the money from one account to another. This is what you may do, for example, when you change jobs and want to take your retirement accounts from the old to the new employer. Unfortunately, moving the money is different from moving the designations; you will have to name your beneficiaries afresh.
If you don't, the default beneficiary designations come into effect. For example, if you aren't married, your estate becomes your account's beneficiary, which means it has to pass through probate. Therefore, you need to name your beneficiaries whenever you roll over your retirement plans.
Take a moment right now and review the list of beneficiaries to your IRA account; does it need updating? If it does, talk to an estate planning attorney right now to help you get it right.