Beneficiary Forms -How To File Them Out Correctly

by Neal Frankle, CFP ®

Your beneficiary forms are one of the building blocks of your estate plan. You might understand all the IRA beneficiary rules but if you make a mistake filing out your forms, you’re in for a world of hurt. And this goes for your other money as well. Your non-retirement accounts (called “non-qualified” accounts) are also included in this conversation.

There are three main mistakes that people make – through no fault of their own – when it comes to beneficiary forms. Here’s a quick review and what you need to know on how to avoid the mistakes.

1. No Form On File

When you open an account it’s your responsibility to make sure the institution has your beneficiary form on file. This is crucial if you want to protect your IRA beneficiaries. Of course, there are two parts to the solution. First, make sure you get the form and fill it out. The broker and bank staff might overlook this form (and they often do). If they do, your beneficiaries will pay the price – not them.

The second step is to make sure to get a copy of your beneficiary form. And once you complete it and turn it in, make a note to yourself to call the institution every year. Ask them to see a copy of the beneficiary form. Believe it or not, they lose the forms often. This happens when one bank or brokerage firm is taken over by another or because they change their computer system. No matter to you, make sure they can retrieve the information every year. If not, consider changing where you do business. The last thing you want is for your heirs to have trouble getting to their inheritance which will happen if the bank or brokerage doesn’t have their own copy of your beneficiary form.

2. Assuming You Can’t Name A Beneficiary

Most people know that they can name beneficiaries on their retirement accounts. But you can also name beneficiaries on your “non-qualified” accounts. If you have a joint account you may not want to do this but if you have your money in your own name only you absolutely need to consider doing this (speak to your attorney first of course).

If you pass away and have money in your own name and haven’t named a beneficiary, your assets will have to be probated. I’ve even seen people forget to name a life insurance beneficiary and of course the agent has no responsibility to bring this to your attention.

This is painful and an expensive proposition to be avoided. Fortunately, if you are an individual without a trust and with money in non-qualified accounts, you can still name beneficiaries. This is known as “Transfer on Death” registration. Ask your attorney about this and if she gives you the thumbs up, tell the bank and brokerage to please set you up. This will establish beneficiaries for those accounts.

3. Get the Beneficiary Info

Your beneficiary forms will require information on your beneficiaries. Sometimes people are hesitant to get that information because they don’t want to tell the beneficiaries about the accounts. I understand the need for privacy. But if you leave those forms blank you’ll be setting yourself up for problems down the road. If you fail to fill out the forms completely and then pass away, your beneficiaries may end up fighting over the money in court. This is probably not at all what you have in mind.

The way to get the information while holding on to your privacy is to tell the intended beneficiary you’ll need their date of birth and social security number. You will need to tell them that you are going to name them beneficiary on some of your accounts but you don’t have to tell them which accounts or what the value of those accounts are. Also, keep in mind, you can change beneficiaries as soon and as often as you like.

Your beneficiary forms are one of the corner stones of your estate plan. Don’t overlook these forms. What steps have you taken to insure the validity of your beneficiary forms?


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