What Issues Should I Consider When Reviewing My Beneficiaries in 2023?

There’s no time like the present to review your beneficiary designations. By taking the time to ensure your beneficiaries align with the instructions of your will or trust, you’ll rest assured that your intentions are realized.

Below we outline some issues to consider when reviewing your beneficiaries in 2023:

• Are your beneficiaries up to date?
  Consider whether your beneficiary designations accurately reflect your overall estate wishes, and be cognizant of different factors that may affect your heirs’ outcomes (e.g., illiquidity, lack of marketability, taxable vs. non-taxable accounts, differing investments, etc.).

• Are your named beneficiaries different from what your will or trust dictates should happen?
  If so, consider whether your account will transfer in the way you desire. Remember that beneficiaries take precedence over a trust or will.

• If you are charitably inclined, do you need to review the investments you intend to leave to charity?
  If so, consider assets that are better suited for charitable giving, such as assets that do not receive a step-up in basis (e.g., non-qualified annuities) and/or assets that are taxed as ordinary income (e.g., pre-tax qualified accounts).

• Do you need to review the planned proportions of qualified and non-qualified accounts being left to your heirs?
  If so, consider the tax implications of non-qualified accounts (which generally receive a step-up in basis) and qualified accounts (which are fully taxed as ordinary income, with the exception of Roth accounts) on your heirs. Be cognizant of how you divide these assets, as some heirs may be left with unequal after-tax amounts.

• Do you have your “estate” listed as the beneficiary?
  If so, remember that assets left to your estate will be subject to probate. Consider updating your beneficiary if this does not accurately reflect your wishes.

• Do any of your accounts have a trust listed as the beneficiary?
  If so, consider reviewing the trust provisions to ensure the trust is still up to date and relevant to your situation/wishes. If the account is an annuity, consider any potential challenges and limitations (e.g., potential loss of preferential tax treatment, potential forced liquidation over the 5-Year Rule, etc.) that may affect your situation.

• Are you concerned about your heirs being subject to unfavorable RMD rules from an inherited IRA?
  If so, consider strategies that may mitigate the impact of RMDs on your heirs.

• Are you concerned about an estate tax liability?
  If so, consider ways you might remove assets from your estate (or freeze them). Review your existing beneficiaries, and determine whether you can mitigate any potential estate tax issues.

Whatever the case, it is important to review your beneficiary designations periodically. We can help you develop a clearer picture of who your beneficiaries are and whether your beneficiary designations align with your estate planning goals.

You can access a PDF copy of our guide here: What Issues Should I Consider When Reviewing My Beneficiaries in 2023?

Concerns or questions about your financial plan? Contact Financial Synergies today.

We are a boutique, financial advisory and total wealth management firm with over 35 years helping clients navigate markets and developing custom financial plans. To learn more about our approach to financial planning please reach out to us. One of our seasoned advisors would be happy to help you build a custom financial plan to help ensure you accomplish your financial goals and objectives. Schedule a conversation with us today.

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