Retirement Accounts and Life Insurance: Time to Review Beneficiary Designations
We frequently meet with new clients who have done a great job contributing to their retirement accounts and buying life insurance to protect their families but have not received good advice about naming beneficiaries for these important investments. The most common mistake we see is when parents designate their spouse as primary beneficiary (good) but designate their minor children as the secondary beneficiaries. By law, the children may be turned loose with the money at age 18. Not a good plan! The better choice is to (1) at a minimum designate a trusted adult as custodian under the uniform transfers to minors act for each child until age 25, or (2) even better, establish a trust for the children with a trusted adult as trustee and designate the trust as beneficiary. The trustee will see the children have what they need and will stand between the children and the money until they are mature enough to handle it on their own. A trust is a legal document you should not write on your own.