You must designate individual beneficiaries for your retirement plans at the time you establish these accounts as well as on an ongoing basis if the needs of your life change. The easiest way to think about this is that your primary beneficiary might be the one person that you choose to receive assets from your assets account if you pass away before you are able to use all of the assets inside. In most cases, this will be your spouse.
A contingent beneficiary, however, is the person who is eligible to receive these assets if the original beneficiary passes away first. It is a good idea to always name a contingent beneficiary so that you can keep all of the benefits of having retirement assets like those in a 401(k) pass outside of probate. You may wish to revisit your primary and contingent beneficiary plans on an annual basis or after every major life event. For example, you might want to update your retirement plan beneficiary if you have recently gotten divorced.
This is a commonly overlooked aspect of post-divorce planning which means that your ex-spouse could be legally entitled to receive assets from your retirement account if you fail to update this account accordingly. Set aside a time to speak with an experienced estate planning lawyer about the best options for your retirement planning future.
Make sure you review your beneficiary forms at least on an annual basis. If anything changes in your life, such as the birth of a new grandchild or the death of a primary beneficiary.
Our estate planning law office can help you with your beneficiary forms, although they will be filed directly with the company maintaining the account.