Check This When Changing Your Clocks for Daylight Saving Time

 November 6, 2016 is the official date for Daylight Saving Time. The time has come to move the clocks one hour back.  And I think everyone could use an extra hour of sleep. Although this means mornings will be lighter and evenings shorter.

With the change of the clocks, the customary change of your smoke detector batteries is advised and the media will make sure that we are reminded of this.

So, while we are changing our smoke detector batteries, why don’t we add one more item that we can check up on?

Make sure that your beneficiary designation for your 401k/IRA accounts are properly updated.Many people are confident that their beneficiary designations are updated for their tax-deferred accounts as well as their life insurance policies.

However, quite often we see that when people actually take a look at the beneficiary designation on these accounts they are surprised that the recorded beneficiaries are not updated or are wrong. So take this time to verify that your beneficiary designations are correct as you move back your clocks.

One additional item to highlight concerning the IRA beneficiary designation. Most people may not realize that the beneficiary chosen on your IRA overrides any will or estate documents that you may have in place. Thus, if the beneficiary designation has not been chosen at all, the benefits will only be paid to the default beneficiary.

Naming a beneficiary for your IRA is like having a will specifically for your IRA and is extremely important, especially since your IRA may be the major asset of your estate.

Your IRA should not pass through your will, but to the person named in your beneficiary designation of your IRA.  If a beneficiary is not chosen, the IRA will most likely pass to your estate which may complicate a number of issues for your heirs. Your IRA will become subject to probate and other related complications, including subject to any creditors and more importantly, taxes.

For IRA tax purposes, a designated beneficiary can only be a person (and/or qualifying trust) with a life expectancy. The designated beneficiary is the person whose life expectancy is used to determine how long the IRA will live on after the IRA owner dies. Without a designated beneficiary, the IRA will generally be paid out quickly after the IRA owner’s death, eliminating any chance of further tax deferral.

At Crimmins Wealth Management, the beneficiary designation is completed when the IRA is established. This is an integral part of opening the account and ensuring that you are aware of the importance of naming a beneficiary. It is also helpful to name a contingent (or secondary) beneficiary in case your primary beneficiary predeceases you.

So, how do you know if you have chosen a beneficiary? You can contact the financial institution and inquire if your 401k/IRA indicates a beneficiary. If you choose to change the beneficiary, you will need to complete a new beneficiary designation form. As for your life insurance, just ask the insurance company to inform you who the beneficiary is on your policy.

By being aware of your beneficiary designations, and reviewing in conjunction with Daylight Saving Time, you are assuring that your wishes are fulfilled.

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The foregoing content reflects the opinions of Crimmins Wealth Management and is subject to change at any time without notice. Content provided herein is for informational purposes only and should not be used or construed as investment advice or a recommendation regarding the purchase or sale of any security. There is no guarantee that the statements, opinions or forecasts provided herein will prove to be correct. Past performance may not be indicative of future results. All investing involves risk, including the potential for loss of principal. There is no guarantee that any investment plan or strategy will be successful.

About Maureen Crimmins

Maureen Crimmins is co-founder of Crimmins Wealth Management and a fee-only independent financial advisor. Have a financial question? ASK MAUREEN


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