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It may not be who you think.  Proper beneficiary planning is essential!

Most people I meet with don’t know how beneficiary designations work.  They just don’t know what they don’t know.  Without proper beneficiary designations, your money may go to someone you don’t want to have it!  That could be disastrous for your spouse, children or other heirs; in effect, you can disinherit your loved ones by your own ignorance!

Take my TRUE or FALSE quiz:

  1.  All my money is distributed according to my will.
  2. If I divorce, my money automatically goes to my new spouse, if I have
  3. My minor children can inherit my stocks.
  4. My company 401(k) plan, my IRA’s and my life insurance pass according to my will.
  5. If I establish a trust, it takes care of all my beneficiary designations.

How did you answer these?  All five of these statements are FALSE.  Following is a quick explanation on why they are false.

  • A critical point to know is that your retirement plan beneficiaries, designated by you, get the proceeds at your death.  It doesn’t matter what your will says!  So, if you have multiple plans with different beneficiary designations, your money will go to whoever is named.  For most folks, their retirement plans are their greatest asset.  Yes, it used to be our homes, but we know what happened with the real estate devaluation in the last several years.  This is only one reason to consolidate your retirement plans with only one or two custodians.  Don’t leave 401(k) or retirement plans where you no longer work.
  • When divorcing, you should make beneficiary designations a priority as soon as the divorce decree ink is dry.  If you leave a former spouse as your beneficiary that person will get the money!  Just imagine how unhappy your current spouse may be if money goes to your “X”!  Literally, millions of dollars go to former spouses each year simply because beneficiary designations aren’t updated.
  • No, minors may not own securities outright.  If you have left securities to them, a custodian or guardian must be named to take care of these funds.
  • No.  Retirement plan and life insurance proceeds pass to whoever is listed on that company’s paperwork as the beneficiary.  It doesn’t matter if this isn’t the person you want to get the funds.
  • No, not necessarily.  Too many people download trust documents online, or draft a trust with some software package.  I’ve even seen several cases where attorneys have drafted trusts, but didn’t follow-through with being sure the trust was named the beneficiary of the life insurance, retirement plans and other eligible assets. It’s a disaster waiting to happen!  If you have a trust established in your will, be sure your beneficiary designations are worded correctly so the trust receives the assets.  Using a trust can be a smart financial strategy for life because it can distribute the money to the people you want to have it, when you want them to get it.  For example, if your trust is beneficiary of your retirement plan and you are worried about one of your children being a spendthrift or not making good money choices, you can designate how the funds are paid out and when.

There are so very many ways that improper beneficiary designations can bite you after you are gone.  Don’t let this happen to you!

I offer a beneficiary check-up to be sure your beneficiary designations are correct according to your wishes.  Taking advantage of this is absolutely a smart financial strategy for life!


Although the information has been gathered from sources believed to be reliable, it cannot be guaranteed
and the accuracy of the information should be independently verified. This material is intended for
informational purposes only and should not be construed or acted upon as individualized advice. FSC
Securities Corporation does not offer tax or legal advice. As with all matters of a tax or legal nature, you
should consult with your own tax or legal counsel for advice.

About Sara Seasholtz

Sara Seasholtz, CFP®, was voted one of "50 Most Influential Women in Charlotte" by The Mecklenburg Times in 2011, and has assisted her clients with their financial planning needs for over 40 years. Have a financial question? ASK SARA!


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