Dear fellow practitioners, CPAs, attorneys, and other professionals. Welcome to the ninth edition of our “Dreidel” newsletter about planning and investment issues of US citizens living overseas.

This month Mike Reed talks about keeping up with the proper beneficiary designations.

Beneficiaries – they are an important part of financial accounts that can often be overlooked or neglected.  Many times, people forget to even add them, and if they do they then forget to check them periodically to make sure they are up to date.

Here is a quick refresher on the types of beneficiaries. 

Primary Beneficiaries: these are the people or person that an account holder would like to leave their assets to when they pass.  The primary beneficiary can be one person or several, and the account owner can decide who receives each percentage.

Contingent Beneficiaries: these are people or person that would inherit an account should the primary beneficiary or beneficiaries pass before the account owner.  Like the primary beneficiary, there can be one or several contingent beneficiaries on an account. It is important to check on these beneficiaries, especially after life events such as a divorce.  Having mixed families or a second marriage can make setting up beneficiaries more difficult. 

Consider the following scenario:

Someone remarries and wishes to leave their IRA to their new spouse and to their children from their first marriage.  It would be easy for the account holder to just name the new spouse as primary and the kids as contingent just like they had in their first marriage.  The problem with this scenario is that once the account holder passes the new spouse is now the owner of the IRA and can do what they please with the account, including changing the beneficiaries to whomever they would like.  They could leave out the children from the account owner’s first marriage and name anyone as beneficiary, thus going against the original owner’s wishes.

A better option may be to name the new spouse and any children from the first marriage as primary beneficiaries. That way when the account holder of the IRA passes, the account will go to everyone he or she  wanted to leave it to.  If there are still any questions, it would be a good idea to check with a financial planner or estate attorney to make sure accounts are properly set up.

As a final thought, you may want to review any bank accounts or insurance policies to see that the listed beneficiaries are up to date and reflect your wishes for the account after your passing.

We are happy to discuss this in further detail. Please contact us to discuss.

Disclaimer Nardis Advisors LLC (“Nardis”) is a Registered Investment Advisory Firm regulated by the U.S Securities and Exchange Commission in accordance and compliance with applicable securities laws and regulations. Registration does not imply a certain level of skill or training. Nardis does not render or offer to render personalized investment advice through this medium. The information provided herein is for informational purposes only and does not constitute financial, investment or legal advice. Investment advice can only be rendered after delivery of the Firm’s disclosure statement (Form ADV Part 2) and execution of an investment advisory agreement between the client and Nardis.