October is Financial Planning Month—yes, it’s a thing, and no, there won’t be fireworks. But it does offer a perfect reminder to make sure your financial house is in order. One of the most overlooked yet crucial tasks? Reviewing your beneficiary designations. It may not be glamorous, but it can save your loved ones a lot of trouble down the road. Let’s dig into why this is important and what happens if you put it off (spoiler: it’s not good).
Why Naming a Beneficiary is Important
Naming a beneficiary ensures your assets go where you want them to when you’re no longer around to make those decisions. It’s about controlling your legacy and making sure your loved ones are taken care of. Without a beneficiary, your assets might be distributed according to a one-size-fits-all legal process. And let’s be honest—who wants that?
To avoid this, remember to:
- Carefully name your beneficiaries (no, your pet turtle probably shouldn’t be one).
- Review those designations periodically.
- Make updates after life events like marriage, divorce, or adding a new little beneficiary (aka a baby).
By doing this, you can help your loved ones avoid probate—because who really wants to make their family deal with legal hoops and red tape?
Consequences of Not Naming a Beneficiary
Let’s talk about what happens if you don’t name a beneficiary, which we’ll file under “things you’d rather avoid.” If you skip this step for your retirement or life insurance accounts, those assets may end up in probate court—a place that’s about as fun as it sounds. Probate is expensive, time-consuming, and could mean your family gets less than you intended. Instead of your loved ones getting the money directly, it may go to cover court fees or taxes (and no one’s putting that on their holiday wishlist).
What Happens to Retirement Assets Without a Beneficiary?
For retirement accounts, it all depends on your marital status:
- If you’re married, your spouse may receive the assets automatically. Lucky them!
- If you’re unmarried, those assets likely go to your probate estate, and then—yep, you guessed it—probate fees swoop in and take a slice of the pie.
In other words, your hard-earned retirement savings might end up benefiting the government instead of your loved ones. Not exactly what you had in mind, right?
Life Insurance: Don’t Forget This One!
Life insurance is no different. If you don’t name a beneficiary, the proceeds will land in your probate estate. This means your family may need to hire an attorney, make court appearances, and wait through the long probate process—all for a payout that could have been as simple as filing a claim.
Want to add an extra layer of stress to your family’s life? Probably not. So let’s skip the legal drama and get those beneficiaries in order.
Keep Your Beneficiary Designations Up to Date
Life is unpredictable, and things change. Maybe you’re recently divorced, or maybe you added a new family member. Either way, you need to review your beneficiary designations regularly. Because let’s be honest—no one wants their ex-spouse inheriting their prized 401(k) by accident.
By keeping your designations up to date, you can make sure your estate plan reflects your true wishes (and avoid any awkward posthumous surprises).
Take Action This Financial Planning Month
If you’re not sure your beneficiary designations are correct—or if you can’t remember the last time you checked them—now is a great time to review them. At Paragon Wealth Management in Doylestown, we’re here to help you ensure your financial plan, including beneficiary designations, is on track.
This Financial Planning Month, take control of your legacy and save your family from legal headaches. To schedule a meeting, give us a call at (215) 543-6576 or email phil@paragon-wealth.com. Because, really, your pet turtle doesn’t need to inherit your IRA.
As a graduate of Germantown Academy, Phil Rosenau earned his bachelor’s degree in economics at Drew University, while also earning a minor in business management. His passion for creating and maintaining business relationships drove him to join the Prudential Advisors team, where he met Charlie and Ricardo before starting Paragon Wealth together.
Phil is a lifelong resident of Bucks County and the son of a local entrepreneur. He understands the unique needs of small business owners, takes pride in providing his clients with the knowledge to understand their unique financial situation, and helping them navigate their financial future with confidence. He enjoys spending time with his wife, Caroline, and two children, he is the current president of the MDM networking group, and he is active with the local CrossFit community. Phil is also proud to be part of the Drew University Lacrosse Legacy where he played all four years.
The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. All investing involves risk including loss of principal. No strategy assures success or protects against loss. There is no guarantee that a diversified portfolio will enhance overall returns or outperform a non-diversified portfolio. Any securities mentioned here are for informational purposes only and are not recommendations to buy or sell any security.
Securities offered through LPL Financial, Member FINRA/SIPC. Investment advice offered through Great Valley Advisor Group, a Registered Investment Advisor. Paragon Wealth Management and Great Valley Advisor Group are separate entities from LPL Financial.