Many people are concerned with their employee benefits and their estate plans separately, but neglect to consider the two together.
That can cause problems, especially when it comes to managing financial affairs after the untimely death of a spouse. For the most part, who receives certain employee benefits after someone has passed away is determined by a form filled out at the beginning of your time working for a company.
“This means that you need to think carefully about who that should be when you fill out the form and it’s vital you fill out a new one as soon as you want someone new to receive the assets,” says Stuart Ritter, a certified financial planner with T. Rowe Price (TROW) in Baltimore.
Retirement benefits like a 401(k), health insurance and life insurance frequently work the same way: the money or coverage will go to the person named on the beneficiary form. If, for some reason, there is no beneficiary listed, then the company’s regulations determine where these benefits go.
“The real issue is what happens if someone doesn’t have a beneficiary listed. It doesn’t automatically go to the spouse. The case goes into probate court and the final destination of the money (or coverage) is ultimately decided by a judge,” says Jay Berger, a certified financial planner in Traverse City, Mich. For example, some married employees still list their mother as their beneficiary because they were hired before their wedding. This means, should they pass away, their spouse may not necessarily receive the assets in question.
The key is to keep track of all your insurance and retirement plans in an orderly fashion. According to Berger, “people should have a list in a file with all of their accounts, the ownership status, the account type, the account number and the beneficiary of those accounts.” Even those who keep track of their retirement plan to a T may sometimes forget about the business related aspects of retirement.
Even the business aspect aside, it is generally a good idea to meet with your insurance broker and make sure that your list of beneficiaries is up to date. Keeping track of this information and ensuring it is accurate is a vital part of any retirement plan.
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