I have written previously about IRAs and the need to update periodically your beneficiaries on your IRAs. I keep seeing this problem come up, so I thought I would say something about it again.
The first point I want to make is that there are accounts other than IRAs which require beneficiary designations. If you have a 401(k) account, a pay on death account, or an annuity with a life insurance company, for example,you may need to fill out a beneficiary designation which states who gets the asset when you die.
The second important point is to remember to update this beneficiary designation when something happens, such as a divorce or a death. I recently handled a case in which the named beneficiary was a son. However, he passed away before the owner of the account, and the owner forgot to name someone else to inherit the asset if his son was not around. In this situation, the trustee of the account usually requires that you transfer the asset through the owner’s estate, which usually means having to go to court and open a probate. This can be time-consuming and expensive. Moreover, the asset may be transferred to someone you didn’t want to receive the asset. If you remember to name a new beneficiary, the property gets transferred quickly to the person you want, at little expense, and without any court intervention.