Ep 42: 5 Beneficiary Mistakes- Are You Accidentally Spoiling Your Retirement Plan?

Ep 42: 5 Beneficiary Mistakes- Are You Accidentally Spoiling Your Retirement Plan?

In this episode, we’ll address five, unfortunately, common beneficiary mistakes. Are you making one of these beneficiary mistakes? If so, it could cost you and your loved ones dearly. Some of the simplest mistakes can completely spoil an otherwise well-done retirement plan.


Get ready to conquer retirement planning like a pro as we dive deep into avoiding beneficiary mistakes that could impact your financial future. We promise you'll gain clear insights on how to safeguard your retirement plan from potential pitfalls, especially concerning minors as beneficiaries. We're kicking off the year with a candid conversation with Sherry Rash, a seasoned wealth advisor, who brings her rich experience to the table to help you understand the significance of proper beneficiary designations.

We'll guide you through the maze of estate planning, discuss the merits of naming a trust as a beneficiary over an individual, and underscore the importance of aligning your beneficiary designations with your will. Sherry Rash shares real-life experiences and emphasizes the dire consequences of not keeping beneficiary details updated. We'll also explore the benefits of naming alternate or successor beneficiaries, a life-saving tip for married folks. So, lend us your ears and allow us to help you secure a smooth sail into retirement.

Full Transcript

0:00:00 - Speaker 1

Discussions in this show should not be construed as specific recommendations or investment advice. Always consult with your investment professional before making important investment decisions. Securities offered through registered representatives of Cambridge Investment Research Inc. A broker-dealer member, finra, sipc Advisory Services through Cambridge Investment Research Advisors Inc. A registered investment advisor Cambridge and Greenway Wealth Advisory are not affiliated.

0:00:20 - Speaker 2

It's time to dive into some insider secrets of investing and retirement planning. To make your retirement as smart and as elegant as possible. This is Money Chic with Sherry Rash.

0:00:31 - Speaker 3

Welcome in to another edition of Money Chic, women and Retirement, with Sherry Rash and myself here to talk. In the new year, we are back with some new podcast episodes and we're going to kick the year off here with five beneficiary mistakes. Are you accidentally, you know, messing up your retirement plan through making some simple mistakes here? So that on this episode we're going to address a few of those. Sherry, welcome in and happy new year and welcome to the new year and all that good stuff. How?

0:00:56 - Speaker 4

are you? Thank you, I'm good. I spent the holiday break eating too much, drinking too much, and I took a few naps, watched a lot of Christmas movies.

0:01:05 - Speaker 3

So it was nice, very nice. I think you and my wife had the same plan, so, yeah, it worked out really well.

0:01:11 - Speaker 4

My record was five in one day. I did watch five movies in one day, oh wow.

0:01:16 - Speaker 3

I think she might have done the same, Something similar. I think Christmas Day, Christmas Day, that's her thing, it's like, because our daughter's grown out of the house so it's just us. You know a little different scenario than you, so she's like Christmas Day is my day to do zero. I'm going to sit on the couch, drink coffee, have some you know whatever, and and watch Christmas movies.

0:01:35 - Speaker 4

So yeah, you watch the Christmas story.

0:01:38 - Speaker 3

She. Actually she is not a big fan of it, and so we haven't we didn't watch it this year.

0:01:42 - Speaker 4

Oh, man, now that the kids not around, you know?

0:01:45 - Speaker 3

did you see the new?

0:01:45 - Speaker 4


0:01:46 - Speaker 3

I have not, so the guys all grown up and he that he made a new version, or they made a new version with him in it. He's a dad now, the guy who was Ralphie.

0:01:56 - Speaker 4

Yeah, I heard it's not bad.

0:01:57 - Speaker 3

Yeah, so yeah, I didn't get a chance to check that one out. We'll have to wind up watching that one. But yeah, with the kid not here, she's like, ah, there's a, there's something I want to skip. And I was like, okay, you're the boss. But anyway, we hope everybody had a good holiday and enjoyed themselves and and of course, we certainly had some cold snaps. All over the country. There was a good I think 60% of the nation had that terrible, terrible cold push that came through there around around Christmas weekend.

0:02:23 - Speaker 1

So hope everybody has survived that.

0:02:26 - Speaker 3

Okay, but let's jump in and talk about today's topic Five beneficiary mistakes. So let's get rolling into these, because you probably are making some of these and you don't realize that it's costing you, and a lot of times they can be fixed pretty easily. So let's run through the first one, naming minors as beneficiaries. What's the deal here, sherry?

0:02:42 - Speaker 4

Yeah. So you know, a lot of times if you are not married or you want your children to receive a portion of your asset, you'll name minors as your minor children as your beneficiary. But one issue with that whether it's retirement money or not retirement money, if they're under 18, they really can't receive it depends on it depends on the type of dollar in your state's rules, but they can't receive that money until they're 18. So it could be a significant amount of time until they receive the benefit of being a beneficiary. This also applies to bank accounts. If your child is your beneficiary of something like your bank account, some states will turn it over to an adult, like the next closest kin as far as adult goes, which that may not be someone you want to have your money or control of your money.

So, although you know intentions are good, grandparents naming their grandchildren as beneficiaries, it's better to name a trust instead and have the and I'm not a lawyer, I have to give that that I'm not a lawyer, I'm not giving advice as far as an attorney but seek out an estate planning attorney and establish a trust. So then your grandchildren or your minor beneficiaries would then be the beneficiary of the trust and the trust would be executed by the trustee.

0:04:07 - Speaker 3

Well, I know often you know financial professionals such as yourself. You certainly work in proximity with you, know elder law attorneys and things of that nature for these reasons, because there's a lot of different stuff on there but yeah, you want to definitely see how that might work for you, and trust are a funny you know, vehicle, because so many people hear that and they go, oh well, I'm not a Rockefeller, right or something.

they think that you know, trust are only for the Uber rich and that's just not really the case at all anymore. So they can certainly be very beneficial, so this could be something to look into. Alright, so that's number one. Number two not coordinating your beneficiary designation and your will. This is a biggie sharey, because most people don't realize you can have a will and that doesn't really matter a whole lot because the BD will trump it all.

0:04:49 - Speaker 4

That's right. Yeah, the will really does not matter as much, it's whatever your beneficiary designation is. So that's a big one that most people, like you said, are not aware of. So just make your life easy. Make sure your will and beneficiary designation match up or it's the same person, and also, because you don't want to create confusion, to make sure everything's working together, because then when your estate's being settled although the beneficiary is the beneficiary and that trumps the will- it may cause a little bit of a, maybe a rift or a little.

You know a little bit of excitement, if they, if someone thinks that money was really supposed to be left to them in the well.

0:05:31 - Speaker 3

Yeah, it's cliche or passe or whatever, but I can't tell you how many and I'm sure you've. You know, when you go to different advisor meetups and things of that nature, you all swap stories and stuff. How many times people actually have these, especially when you're usually ones up being something like a second marriage often and you've got a policy that's 25 or some 30 years old or something and you forgot about it and you never changed the X. What would be out be now be the ex-spouse, you know, and that's. This makes for a good recipe when the new spouse finds out that the ex-spouse is getting it because there's yeah, there's.

You know there's a lot of legal precedent and court costs that go into that kind of thing.

0:06:08 - Speaker 4

So, yeah, and I really wanted to talk about this today because I just unfortunately had a client that passed away at the end of 2022 and he transitioned over to me when his advisor retired, so his accounts just moved over to me and I remember when we first were meeting. I'm like your beneficiary is your mother and she's deceased.

So we need to fix that and unfortunately it just didn't. You know it got all right, let me think about it. Let me think about it. And he passed away before you could make that change and the way that works it's. It's not terrible, but it's not.

0:06:47 - Speaker 3

It's more work than maybe was needed, because like you said before, changing a beneficiary is pretty easy, so it was a good. Is it good to probate in that situation?

0:06:56 - Speaker 4

It went to the estate. Yeah it's going to the estate and then it'll be split up the way his estate was determined. So in the end it was okay, but that's just something to double check and make sure and I, you know I go through this every year with my clients just double check the beneficiaries. Does all of this look right or do changes need to be made?

0:07:18 - Speaker 3

Yeah, and you know, and that's a great example to share. I mean not great from this, this fact that the person passed away unfortunately there, but to the importance of doing it right.

I mean like so he had a person on there that was deceased and then he himself unfortunately passed before making that change, and it could have been changed in five minutes, you know. So it's pretty easy to do. So, yeah, definitely coordinate those two things so that you don't have issues there. Number three alternate or successor beneficiaries. And this could maybe tie back to the minor conversation. To begin with, right, Maybe maybe you put on an alternate if you're doing a minor child. Is that something that people do sometimes as well?

0:07:55 - Speaker 4

They could name alternates or successor beneficiaries, but also having what I call what you know common phrasing for it is contingent beneficiaries. So you have a primary beneficiary. So let's say your primary beneficiary is your spouse and then your contingent could be and most people do their children right as the second. Where we're, where we just talked about earlier. That probably isn't the best route to go. It might make more sense to have your trust or your trust just listed as your primary, and then the trust dictates how the money is distributed amongst your spouse and your children, if applicable.

But having the primary beneficiary, if the primary beneficiary were to pass away, it then moves to the contingent beneficiary. So contingent only comes into play if the primary were to pass away. So if the primary is no longer live and in the case of my client, if he were to have named his next of kin as his contingent, there'd be no issue Okay, your primary is deceased. Now we move on to your contingent. But because neither were listed, that's when it went to the estate and created a little bit more paperwork. But that's definitely having a primary and a contingent is helpful.

0:09:11 - Speaker 3

Yeah, and a lot of times. Sherry, I guess this is going to be important for married couples, right? So let's say you've got that alternate. You know, like you would have your spouse right, you'd have your husband or wife as your beneficiary designation and event. Something happens to you, and so maybe an alternate then would be your child right, or adult children, or whatever that might be. But because what are the odds of both of you passing away at the same time? Probably not good, but it's still not a bad idea. I've definitely come across situations where, unfortunately, an accident or something happened and both you know parents passed, and so the child was the alternate. They were an adult child, but still you know, so that's a good way to think about that as well. Okay, you mentioned a estate before, so let's talk about that. What's the complication there of naming an estate as a beneficiary, and is it make more sense to do that if you have a trust? If not, like what's some things to ponder there.

0:10:00 - Speaker 4

So if you name your estate as your beneficiary, your assets will then go through probate, and what that means is the courts then decide how your assets are distributed. So they essentially look at your family tree who is your next of kin going through your bloodline? Well, what happens if your next of kin is your brother and you haven't spoken to him for 25 years? The courts don't know that so, and your money could end up going to someone you don't necessarily want to have it. So that's the issue with just naming your estate as the beneficiary. It goes through probate, and then they also the courts could also use your assets to repay your debts.

0:10:44 - Speaker 3

Okay. So yeah, certainly something you want to have that conversation with, to kind of get all that worked out, with whatever your you know retirement strategy calls for and your legacy strategy and so on and so forth. What about just a simple one of make and errors? How complicated can that get? Is it something that you know it's easy enough to fix, or what's there when it comes to just filling out the applications correctly?

0:11:06 - Speaker 4

So when, when you designate beneficiaries, you're asked a lot of information obviously the name, the date of birth, the social security number, address, email, phone number you're asked a lot of information and most financial companies will say we need at least like two or three of those things. We don't need to have every detail, but in this case, if you were to make an error and you don't have a lot of info, if they don't have a lot of information on file, it could create some headaches as far as the beneficiary needing to validate their social security number, sending in licenses, all that stuff. So the more information you give, the better in the event a mistake is made when you fill out the application.

0:11:48 - Speaker 3

Yeah, indeed, All right. So I mean some simple fixes. I mean some can get complicated. Most of the time, this is something easy to take care of when dealing with beneficiary designations. So, and this should be part of the annual review process, correct? Absolutely yes, so anything else that might have missed.

0:12:04 - Speaker 4

No, I mean, like you said, it just takes a few minutes to fix it and it could save a lot of headaches in the future for your beneficiaries, especially when they're going through enough of the loss of you, so making it a little bit easier for them. Obviously, they would appreciate that very much. In the end, I would also say let your beneficiary know that they are your beneficiary. I have a client who is single and he has two brothers and he said can you give me a statement to show my brothers that they're my beneficiary? I said well, how about let's draft a letter and they'll have all of my contact information, because they don't necessarily need to know how much you have, they just need to know that it exists. So that's something else to do. Let your beneficiaries know they're beneficiary so then they know who to contact. Give your advisors information and let them be the point person to help you figure all of it out.

0:13:00 - Speaker 3

There you go, some great points, for sure, and again they're easy fixes. And not only is the frustration level there when this could have been done ahead of time, but also there could be costs involved that you're leaving your loved ones to deal with there, when it could have just been a simple fix. So make sure you're updating these. A pretty simple thing to do is starting out the new year. People are always looking for little items to improve their financial health. If you will, and BD adjustments are easy to do Maybe you got to take somebody off there that's no longer in your life, or add someone new. Maybe your grandparent got a new grandbaby, whatever, right. So you want to make sure that you're doing those things and updating those, and it's pretty easy to do. So reach out, have a conversation with your financial professional or your CPA or elder law attorney or whatever you need to do, and, of course, sherry is here to help you.

You can reach out to her at GreenwayWealthAdvisorycom. That's GreenwayWealthAdvisorycom. Don't forget to subscribe to us on Apple, google, spotify, all that good stuff. You can find us under Money, chic, women and Retirement. Just type that into the search box of whatever app. Or, again, just stop by the website GreenwayWealthAdvisorycom. We'll be back with more in a couple of weeks here on the podcast. Sherry, thanks for hanging out, as always, I appreciate you.

0:14:07 - Speaker 4

Thank you.

0:14:08 - Speaker 3

Yep, we'll see you next time here on Money, chic, women and Retirement with Sherry Rash, financial Advisor and Money Coach at Greenway Wealth Advisor.

0:14:21 - Speaker 1

Investments in this show should not be construed as specific recommendations or investment advice. Always consult with your investment professional before making important investment decisions. Securities offered through registered representatives of Cambridge Investment Research Inc. A broker dealer member, finra SIPC Advisory Services through Cambridge Investment Research Advisors Inc. A registered investment advisor, greenway Wealth Advisory, are not affiliated.

Shari helped my husband and I consolidate our finances and create a system that works for us. She is a great listener and very authentic - we are thrilled to have this trusted advisor on our team.

Jessica, Charleston
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