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Real Estate Planning Blog

Monday, August 7, 2017

Updating Your Retirement Account Beneficiary Designations

Far too many individuals approach estate planning as a “once and done” situation, and merely draft up a will and leave it in drawer. A well designed estate plan, however, should consider inevitable changes that will occur during a person’s lifetime. Whether it’s getting married, have children, getting divorced, remarrying or retiring, it is crucial to keep wills, trusts and other estate planning documents updated. Similarly, it is important to ensure that beneficiary designations on retirement accounts are also up to date.

Types of Beneficiary Designations

There are two types of beneficiary designations: per-stirpes and per-capita. In a per-stirpes designation, the share that a primary beneficiary would have received goes to his or her heirs in the event he or she predeceases you. On the other hand, a per-capita designation provides that assets will be divided among the successor heirs in the event the primary beneficiary predeceases you.

Reasons to Update Beneficiary Designations

Although retirements accounts and life insurance policies with designated beneficiaries are generally not included in an estate, these designations should match your overall estate plan. By failing to specify these decisions initially, the court will make these determinations in a way that does not agree with your wishes.


Moreover, these designations must be revised in the event of divorce or remarriage so that heirs will not become embroiled in a lengthy and expensive court battle. In addition, designations should be updated if children are born after initial designations have been made. Finally, successor beneficiaries must also be named in the event that a primary beneficiary predeceases you or if you die simultaneously.

401(k)s and Other Qualified Investment Plans

It is important to note that under federal law, a spouse is designated as the beneficiary on a 401(k) or other qualified retirement account. If you wish to name a person other than your spouse as the beneficiary, he or she must approving the designation in writing on a document must be notarized. For single individuals, the estate may be the default beneficiary if an individual is not designated. The assets would then be distributed according to the estate plan, or state law if no plan is in place.

Trust Beneficiaries

Another way to ensure that retirement assets are distributed according to your wishes is to designate a trust as the beneficiary. With the right type of trust in place, financial support can be provided to your surviving spouse as well as any children from a previous marriage.

The Takeaway

Decisions about beneficiary designations for retirement investments and related estate planning issues can become complicated as the circumstances of your life change. For this reason, you are well advised to engage the services of an experienced estate planning attorney to ensure your estate plan and beneficiary designations are up to date.





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