Tax Hotline’s experts frequently advise their readers to check all beneficiary designations on employer-provided retirement plan accounts, IRAs, insurance policies, and other such financial assets. We agree and think that this is very important as well.
Why: To be sure not only that they are up to date, but also that they haven’t been lost or mistakenly recorded by the financial institution involved.
One Tax Hotline reader’s experience:
“Last year, I thought I would review my IRAs and life insurance policies to be sure they were all current with respect to beneficiaries. What I found shocked me.
“It turned out that of five IRAs, three had the wrong information. One life insurance policy was also wrong. The discrepancies were the fault of the companies involved-the errors were so far off base that I would never have made these choices.
“One IRA had no beneficiary listed, but my wife and children were listed initially-14 years ago. (I had saved a copy of the original application.)
“These need to be checked. Don’t assume they are correct no matter how the original application was filled out.”
-Doug Sweet, Birmingham, Alabama
A mistaken beneficiary designation can be very costly-causing funds to pass otherwise than you intend and greatly increasing taxes on them.
So check them out!