June 29, 2016
The Greatest Gift
By Richard J. Schillig, CLU, ChFC, LUTCF
Independent Insurance and Financial Advisor
Last month I asked the question “Do I need Life Insurance?” The answer to that question is a resounding – NO – I don’t need life insurance BUT my survivors need insurance on me. My survivors need to make sure I have life insurance.
Survivors – do you know the beneficiary arrangement on the person you need to have life insurance? AND do you know the beneficiary arrangement on retirement accounts? Do you know who that beneficiary is? When was last time you reviewed the person or persons designated as beneficiary on your life insurance and retirement accounts including annuities? Can you recall the last time you reviewed that designation? It is generally a good idea to periodically review your beneficiary designations. In my practice I always ask clients and potential clients who is the beneficiary on your retirement plans and/or life insurance policies. The typical response received is the primary beneficiary is spouse. That’s appropriate and normally who beneficiary should be. But beyond the spousal primary beneficiary, often times I receive a “deer in the headlights” response to a question of contingent beneficiary(s).
Some time ago within a 50+ Lifestyles article, we cited a court ruling awarding a retirement account of a deceased person to the former spouse – not the current spouse – but a
former spouse. That is a real life case in which current spouse was denied inheritance because the beneficiary designation on the account was never changed from former spouse to the current spouse. This case demonstrates the importance of reviewing the named beneficiary on life insurance and retirement accounts to include not just primary beneficiary but contingent beneficiary(s). Contingent beneficiary(s) could be as important as primary beneficiary designations.
It is generally a good idea to review beneficiary designations periodically and to inform your financial professional when there are changes in your life that could affect your
beneficiary choices – such as birth of child, illness or death of family member, marriage, divorce and especially remarriage. It is important not only to inform your financial professional of this status but also to make sure the company – the insurance company or Investment Company, mutual fund Company, broker, banker – make sure your affairs are in order.
Recall we periodically refer to the ‘greatest gift.’ Normal during the Christmas Season and the Season for giving, we refer to the appropriate gift for family and loved ones. The greatest gift we can provide for our families is the gift of having our affairs in order. Having our affairs in order include the proper beneficiary arrangement for our various plans. Can you imagine the inevitable conflict arising in that family in which a former spouse is the current beneficiary?
In today’s world with the prevalence of divorces and multiple families mixes, beneficiary designation update is more important than ever before. We have numerous clients today remarried later in life following earlier divorce. Current husband has children from first marriage. Current wife has children from first marriage. Now as a new family what will happen to the assets of this new marriage for these spouses and children, step children? Do you see the potential for family disagreements in these situations? Would not an easier solution result from clearly defined and dated current beneficiary choices.
Most companies do not charge a fee for beneficiary designations. Most companies require merely the completion of a company designated beneficiary form. It is not a difficult process to achieve. I encourage all readers today when you finish readying this article…..ask yourself…..who is the primary and contingent beneficiary(s) to my assets? What evidence of that beneficiary designation exists? Encourage you to check on that today. Provide the greatest gift to your family….the gift of having our affairs in order.
Richard J. Schillig, CLU, ChFC, LUTCF is an Independent Insurance and Financial Advisor with RJS and Associates, Inc. He can be reached at (563) 332-2200.
