Updating your beneficiaries when preparing your annual tax return is a natural way to complete two important tasks at the same time.
Retirement anxiety increases as seniors face Trump’s tariffs and stock market decline
Vicki Knight, a retired educator and part-time yoga instructor, says her body feels toned. “I’m semi-retired,” said the Marietta, Ga., resident, whose Social Security income isn’t enough to survive, and the recent stock market drop due to tariff uncertainty has complicated her plans.
Millions of Americans are expected to receive larger-than-usual tax refunds this year, which makes it especially important to double-check who you’ve named as your beneficiaries.
Imagine that, like many couples, you named your spouse as the beneficiary on your account, but you recently divorced. Suppose your tax refund is deposited into your bank account and then you suddenly die shortly after. Unless you change the beneficiary (usually called payable on death if it’s tied to a bank account or CD), it’s your ex-spouse who walks away with that money.
Unless that’s your intention, now is the time to take a fresh look at all your important accounts and make sure you name the beneficiaries and contingent beneficiaries you really want the funds to go to.
Why is tax season the ideal time?
Estate planning is not intended to be a “set it and forget it” process. As your life evolves, your plan, including your beneficiaries, should also evolve. Here’s why it’s beneficial to tie beneficiary renewals to the annual April tax deadline.
- Tying beneficiary updates to April 15 is an easy way to remember to tackle this task at least once a year. Think of it as an annual reminder.
- If a CPA helps you manage your taxes each year, he or she can also help you identify ways to minimize taxes while you are alive and to minimize the taxes your beneficiaries will pay after you pass away.
- Dealing with taxes and beneficiary allocations at the same time is a good way to review how much money you’re making, how much you’re investing and saving, and how much you want to return to each beneficiary.
- Estate planning may not be at the top of your “to-do” list during tax season, but it is a natural opportunity to ensure your plan reflects your family’s needs, current tax situation, and personal goals.
- Chances are, you’ve already gathered your important financial documents as April 15 approaches, and now is the perfect time to go through them to make sure your beneficiaries have the most up-to-date information.
When collecting tax-related documents, it doesn’t take much effort to pull out all your other financial documents, such as life insurance policies, 401(k)s and IRAs, bank accounts, health savings accounts, real estate deeds, pensions, trusts, and more.
If you plan to identify your beneficiaries each year at tax time, make sure to keep all your financial documents in one place where they’re easy to find.
Typically, the beneficiary of the designated account will be at the top
Even if you have a strong will in place, beneficiary designations for specific accounts usually take precedence over the will’s instructions. Therefore, if you name your child as the sole beneficiary of your estate and your spouse as the beneficiary of your life insurance policy, your life insurance proceeds will go to your spouse.
To ensure that the people you care about (and their causes) are taken care of when you’re gone, it’s best to go through your accounts and update your beneficiaries at least once a year. Connecting your tasks to April 15 will make it easier to gather all the documents you need to handle both jobs.
The Motley Fool has a disclosure policy.
The Motley Fool is a USA TODAY content partner providing financial news, analysis and commentary designed to help people take control of their financial lives. Its content is produced independently of USA TODAY.
