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Important considerations for regularly reviewing your account beneficiaries

Mar 06, 2020 | Courtney Mahoney


Beneficiaries tend to be something we set and forget when we open financial accounts. Regular review ensures alignment with your wishes and can assess tax efficiencies.

Grandpa with grandkids

Many people don’t realize that retirement account beneficiaries are not dictated by your will. The beneficiary designation on each of your retirement accounts determines the distribution of those assets after your death.


Beneficiaries tend to be something we “set and forget” when we open financial accounts. While this is an OK strategy when you get started, these are something that should be reviewed regularly and most importantly after any significant life change (marriage, death, divorce, decline in cognitive capabilities, birth of a child) to ensure the listed beneficiaries are in line with your wishes and structured as tax efficiently as possible.

Retirement Accounts

There are a variety of retirement account types, the more common being an employer sponsored 401k or 403b plan. You may also have an Individual Retirement Account (IRA) or Roth IRA held at a brokerage firm in addition to your employer.

If you are married, the beneficiary on these accounts is most likely your spouse. However, in some circumstances your spouse is able to waive their right to be the beneficiary via a simple signature.

If you are unmarried, you may list this beneficiary to anyone over the age of 18. A sibling, parent, niece/nephew, dear friend are all good examples of beneficiaries. In most cases, you would not want to list your estate as the beneficiary of this account type, since probate court will ultimately decide when these assets are distributed which can take months.

Review Titling of Non-Retirement Accounts

As with retirement accounts, consider having non-retirement accounts set up as Joint Tenant with Rights of Survivorship (JTWROS) or Transfer on Death (TOD) in order to bypass the probate court process. JTWROS allows all owners equal ownership rights as well as equal survivorship rights at the passing of one of the owners. TOD accounts allow the transfer of assets at the death of the original owner. Please note, an account cannot be set up with both JTWROS and TOD.

Health Spending Account (HSA)

If you list your spouse as the beneficiary of an HSA, the ownership can simply be transferred to them upon your passing and maintain their existing structure and tax efficiency. A non-spouse beneficiary will inherit the HSA as taxable income to them in the year of your death. In the latter instance, it will be important to be mindful of the tax burden you may be causing a non-spouse beneficiary.

Life Insurance

Life Insurance beneficiaries may not need to be reviewed all that often. This would be an instance where I would review after a divorce, unless you are required by your divorce decree are to leave the proceeds of the policy to your ex-spouse to care for children in your absence.

Please contact us today if you need assistance in updating the beneficiaries on any of your accounts.


Wealth planning