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Be sure to update beneficiary designations on retirement assets

Who will receive an individual’s retirement account upon his or her death? One person is named in the will, and another is named on the beneficiary designation filled out by the decedent back when the account was opened. Many people in Massachusetts would make the assumption that the assets in the account would be given to the person named in the will. However, that would be an incorrect assumption.

Under the law, the individual named as the beneficiary on the form filed with the company administering the retirement account will receive the funds. This could include an ex-spouse or another party listed on the designation. This is because these types of accounts pass through what is called an operation of the law.

This is just one of the reasons that a person’s beneficiary designations need to be reviewed for accuracy at the same time an estate plan is being reviewed. An individual can make any and all changes that he or she desires to an estate plan, but if it contradicts a beneficiary form on a retirement account, the retirement account will win every time. Therefore, if a person does not want someone receiving anything from his or her estate, everything must be reviewed and updated as needed.

Some Massachusetts residents can unintentionally sabotage their own estate plans by neglecting beneficiary designations. It may be helpful to create a thorough list of assets, including retirement accounts, to be periodically checked to be sure it is accurate. Otherwise, all of an individual’s hard work could end up providing the wrong person with a windfall in the event of death.

Source: ABC News, “How Your Ex-Spouse Could Inherit Most of Your 410(k) Money“, Laura Mattia, May 23, 2014


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