Beneficiary Designations - A Critical Part of Estate Planning

Estate planning is such an important part of personal financial planning, yet many people do not review and update their estate plans as often as they should.   A little advance planning goes a long way in making sure your wishes are carried out after you die. Most people are familiar with the need for a will (and in some cases a revocable trust) to direct how your assets pass at death.  There is a lot more to good estate planning than just a proper will.  If you really care about making sure your assets are passed on the way you want, read on…you may be surprised.

Many people mistakenly think their will dictates who will receive all of their assets, however, retirement accounts such as Individual Retirement Accounts (IRAs), 401(k) and 403(b) retirement plans are some common assets for which beneficiaries must be named.  The same goes for life insurance policies. Your will or trust will not override the named beneficiary designation on these accounts. Beneficiary designations are legally binding documents, the assets will go to the person you named in the beneficiary designation when you last updated it.

Often an individual’s largest assets may be held in one of the above mentioned accounts, which makes it extremely important to keep the beneficiaries updated.  To ensure that the designation reflects your wishes beneficiary designations should be reviewed periodically and revised especially before or immediately after life events including marriage, divorce, remarriage, and birth or adoption of a child.

Don’t put off reviewing and updating these documents, particularly if you have not done so since they were set up.  This will be time well spent and will help make sure that your assets are passed on smoothly to your loved ones. Please feel free to contact our office if you have any questions on beneficiary designations or estate planning in general.

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IRA Transfers

There are many reasons that you might consider an IRA transfer; questions to think about may include:

1. Investment Options: Are you satisfied with the number of investment options in your IRA portfolio?
2.  Performance:  Are you comfortable with the performance of your IRA portfolio?
3. Guidance and Advice:  Do you receive appropriate advice from the institution that currently holds your IRA?

The term IRA Transfer is a transfer of assets from one IRA to another IRA. An IRA Transfer from one financial institution to another via a trustee-to-trustee transfer is made tax-free.

There are basically two methods to transfer an IRA. Both methods result in a tax-free transfer of assets from one IRA to another IRA, if done properly,

1. Direct Transfer (Trustee to Trustee)
   A direct transfer is the movement of assets from one IRA directly to another IRA. With a direct transfer you never take possession of your retirement assets. Instead, the trustee/custodian will transfer your IRA assets directly to the financial institution where your IRA is held.  A direct transfer is the most streamlined of the options since it avoids the 60 day rule and the possibility of incurring taxes and penalties that can occur if the indirect transfer isn’t executed properly.  
2. Indirect Transfer (60 day rollover)
   Assets from your IRA are paid to you in the form of a check. You then have up to 60 days to reinvest the money back into an IRA. If the assets are not reinvested within 60 days then taxes and penalties will apply.
   
   You may execute only one 60 day rollover every 12 months per IRA account.
   

Let us know if we can help you with this process in any way.