Encourage Your Clients to Do Beneficiary Reviews

Filed under: The Advisor's Blog

iStock_000015879466XSmallPart of your role as a CPA is helping clients stay on top of all their financial matters. Taxes, life insurance policies, estate planning, retirement accounts, investments… It can all add up to a confusing maze for some of your clients. As you guide clients in their financial decisions, keep in mind that many of them may often overlook simple matters that we tend to take for granted. One of these is beneficiary designations.

When your clients bought a life insurance policy or started a retirement account years ago, they were asked to name a beneficiary for the funds. And yet, as time goes by many people never reconsider that designation – even though they should! There are many reasons a beneficiary may need to be changed at a later date, so remind your clients to re-evaluate this decision once per year. And since most of your clients probably hold numerous accounts in different places, use this handy checklist to help them keep track of it all.

Life Insurance. After filling out the proper forms to change beneficiaries, tell clients to follow up with a phone call to be sure everything was received and processed properly. Remind clients that aside from their main life insurance policy, they may also have life insurance through their work. They should contact the human resources department through their employer if changes need to be made to that policy. All of these same rules apply to disability insurance as well.

Health Insurance or Health Savings Accounts. Health insurance savings accounts can be used to pay medical bills for up to one year after your client’s death. Ask them if they’ve designated someone they trust to take care of those matters. Otherwise their estate will be billed for unpaid medical expenses.

Annuities. When your client updates beneficiary information on their annuities, they should also check to be sure the payment option is appropriate for the beneficiary.

Retirement Accounts. Your client may hold numerous accounts, such as Roth IRAs, traditional IRAs, pension plans, 401(k) or 403(b) plans. Remind them that each account needs to be updated. In many cases it’s easy to keep track of everything by rolling old accounts from past jobs into one easy to manage IRA.

Bank Accounts. Depending upon your state’s laws, your client may be able to utilize a Transfer of Death designation. This means their beneficiary can access funds by simply providing the bank with a death certificate. This can protect the funds against probate proceedings, and helps the beneficiary take care of other expenses in a timely manner.

529 College Savings Plans. The beneficiary on a college savings plan may change more often than your client would think. If they’re saving for several children, but the beneficiary earns a full scholarship, the money should probably be transferred to another child. It can also be saved after graduation (if there is money left over) for your grandchildren.

Wills and Trusts. Remind your client that the beneficiary designations on the individual accounts listed above will override their will. A will is extremely important and must be updated regularly.

Investment Advisory Services offered through John P. Dubots Capital Management, LLC, CA License # 0822926