FOX 4’s financial expert Kathy Stepp explains beneficiary designations and why they are important.
They are used on life insurance and retirement plans (including IRAs). In addition, it is possible to place a beneficiary designation on some other assets.
Wills deal with assets that DO NOT have beneficiary designations. Therefore, if you have executed a will that exactly meets your desires for distributing your assets, do not assume that your life insurance and retirement plans will be distributed according to the wishes in your will.
The way to place a beneficiary designation on a non-retirement asset is to add a “payable on death” provision to the assets. Banks allow this for bank accounts, and in Missouri and Kansas, a similar provision is allowed on real estate deeds. This provision transfers ownership upon death, but it allows the owner to retain 100 percent ownership in life.
It is common to name beneficiaries and then forget who we named! Therefore, keep copies of all beneficiary designations and review them periodically to keep them current. Also, new marriages, divorces, etc., may be reasons to change beneficiary designations.
Remember to name a secondary beneficiary as well as a primary beneficiary. This is especially true when a spouse is named as primary beneficiary. In the case of a common disaster, you will want a secondary beneficiary named.
If you have a question for Kathy, email her at Kathy@SteppAndRothwell.com