5 Easy Steps to Create a Beneficiary Plan

The thought of leaving a legacy that can smooth the way for others, such as your children, is a great feeling. Sometimes, though, good intentions aren’t always enough. Without careful planning, a significant portion of your estate can be eaten up by taxes, tied up in probate court, or distributed to people other than your intended recipients.

By creating a comprehensive beneficiary plan, you can make sure your wishes are followed.

A beneficiary plan is more than just a will. It includes strategies to help your beneficiaries receive and manage their inheritance while avoiding unnecessary taxes and penalties.

To begin your plan, consider these steps:

  • Work with a financial professional. A financial professional with experience in estate planning can evaluate your situation and recommend the appropriate strategies to help you achieve your goals.
  • Review your assets. These include IRAs, employer-sponsored retirement plans, bank accounts, and stocks, as well as your home and any other major assets. Record company names, account numbers, and the intended beneficiary for each asset. Make sure to note where you physically store the documents.
  • Review your current beneficiary designations. Who do you want to receive your assets? Work with your financial professional to bring your designations up to date when circumstances change.
  • Evaluate distribution options. There are several options to help minimize the tax liability of the beneficiary. For example, “stretching an IRA” allows non-spouse beneficiaries to have IRA assets stretched out based on his or her life expectancy. The assets have the potential to grow tax-deferred throughout the beneficiary’s lifetime.*
  • Consider a family meeting. Together with your financial professional, hold a family meeting once your beneficiary plan is complete. This gives you a chance to share your intentions for your assets, and helps your beneficiaries feel better prepared when the time comes.

You may want to start with the Beneficiary Planning Investor Guide and Beneficiary Checklist. You’ll feel better knowing that a strategy is in place, and your beneficiaries may ultimately benefit from your careful planning.

*Stretching an IRA may not be appropriate in all circumstances. Additional fees and expenses may apply to assets during the time it is being stretched. Consult your tax advisor to determine if this is appropriate for your unique circumstances.

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