Question: How do I go about changing beneficiaries on my retirement account?
Answer: From a procedural standpoint, changing “designated” beneficiaries on a retirement account is generally a relatively simple task. As a first step, you should request the proper change of designated beneficiary forms from the administrator of your retirement plan. Once you have received, reviewed and completed the necessary forms, you must take steps to ensure that you receive written confirmation that the change of beneficiaries has been duly noted and accepted by the plan administrator. It is advisable to make copies of the forms for your own records and to send the originals via certified mail, return receipt requested.
Further, do not necessarily feel locked in to the pre-printed forms that are provided to you by the plan administrator. If your desired beneficiary designation does not fit in the space or the categories provided, you should speak with the administrator directly and advise that you intend to provide a type-written rider to the pre-printed form.
There are several other significant issues worth noting. For example, if you are designating multiple beneficiaries, you should indicate as such by percentages (%) and obtain information from your plan administrator regarding the option of “rolling over” the retirement funds into separate accounts for your respective beneficiaries. Additionally, do not forget to designate contingent beneficiaries in the event that your primary designated beneficiaries should predecease you. This is a step that is often overlooked, yet is crucially important. Failure to name beneficiaries and contingent beneficiaries could result in a loss of the preferential tax treatment received in an IRA. Additionally, you should contact the retirement plan administrator to ensure that authorization is in place requiring the administrator to provide information to your executor after your death.
Finally, you should read your retirement plan document carefully, and you should review any changes with your financial planner and/or attorney to ensure that the designation is clear and that it is consistent with your estate planning goals. Since the value of an IRA is included within the owner’s gross estate for estate tax purposes, you should ensure that any estate tax burden is allocated amongst your heirs in accordance with your wishes. Oftentimes, an IRA is the greatest asset in a person’s estate besides their home, for that reason, it is crucial to consider your entire estate plan, including who stands to take under your will as well as other designated beneficiary accounts when naming beneficiaries to you IRA’s. Doing so will guarantee that your testamentary intent is carried out with respect to your entire estate, not just those assets passing through your will.
By: Nancy Burner, Esq. & Robin Daleo, Esq.