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401K Plan Beneficiary Designations

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					                      401K Plan Beneficiary Designations


Most adults have completed a beneficiary designation form at some point. We complete it
when we are hired, or become eligible for the company 401(k) Plan, and then we forget
about them. But your beneficiary designation for your retirement plan is a critical part of
your tax and estate planning. While many of us make sure that other important
documents such as wills are updated on a frequent basis, it is easy to overlook your
retirement account information.

Often people think "I have a will; I'm covered". But having a will is not enough. Most
people are not aware that your beneficiary designations for your retirement account
override your will.

The primary purpose of naming a beneficiary is that those assets can pass directly to
whomever you designate. They won't have to go through probate, which can be a lengthy
and expensive process.

You can name almost anyone your beneficiary, including individuals, charities, and
trusts. However, if you are married, Federal Law mandates that your spouse is your
default beneficiary and he or she must consent in writing to any other beneficiary. While
children can be named as beneficiaries, they cannot control the assets until they reach the
age of majority (age 18, in the state of Indiana). Therefore, it is advisable to set up a trust
in their name and then name the trust as your beneficiary. That way you have control
over who the trustee of the trust will be rather than have the court decide who will handle
the money until the child reaches 18 years old. Also, unless you want the child to have
complete control of the money when they turn 18 years old, there are other reasons to set
up such a trust.

If you have been divorced, married or remarried, or had children since your retirement
plan account was established, you should review your beneficiary designation on file to
be sure it still reflects your wishes.

Here are some tips:

      Periodically review your beneficiary designations to make sure they still reflect
       your wishes

      Update your beneficiary designations after any major life change (marriage,
       divorce, birth of children, job changes, etc.)

      Keep a copy of your beneficiary designation form for your records

      Be sure that contingent (secondary) beneficiaries are named in the event your
       primary beneficiary dies before you do
   Keep in mind that your beneficiary designations will override your will

   If you are married, your spouse must consent to any other beneficiary

   Do not name your minor children. Set up a trust for them first and then name the
    trust as your beneficiary

   Seek the professional advice of an estate planner or tax or financial advisor if you
    have any questions regarding how to allocate your assets

				
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posted:5/29/2012
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