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Cleaning up your financial records

FinancialCleaning 600In 2013, the U.S. Supreme Court settled a case between a widow and her deceased husband's former wife regarding who would receive the man's federal employee insurance benefits. The judges ruled in favor of the first wife, even though the couple had been divorced for more than 10 years when he died, because she was still the designated beneficiary on his policy.

Some people may not be aware that the assets in most bank accounts, retirement plans, and insurance policies convey directly to the people named on the beneficiary forms, even if they are different from the people named in their wills or trusts. Others simply forget to make the appropriate changes in writing.

If your beneficiary forms are out of date – and your intentions somehow become a matter of dispute – a state and/or federal laws or the administrator's plan documents could ultimately determine who receives your assets.

A common oversight

It's generally a good idea to review your beneficiary designations annually, and to inform your financial professional when there are changes in your life that could affect your choices, such as the birth of a child, the illness or death of a family member, marriage, divorce, and especially remarriage.

It's fairly easy to update your beneficiaries. You can simply file a new beneficiary designation form with the appropriate financial institution or insurance company. Here are a few other things to consider when naming new beneficiaries.

Many laws favor spouses, so be careful when you intend to name someone other than your spouse as a beneficiary.

Don't name minor-age children without making arrangements for a guardian or trustee to control the assets until the beneficiary is old enough to manage them.

Request an acknowledged copy of each new or updated beneficiary form from the financial institution or your financial professional (or print a copy if filed electronically) and store them with your other important documents.

Keep or toss

It's not unusual for people to have several file drawers or even many boxes full of old financial records. However, the more unnecessary items you have, the harder it can be to find critical papers when you actually need them.

If you want to rid your home of unnecessary paper clutter, it could be worth the effort to sort through your files. There are several important reasons to keep specific records for future reference: to back up information on tax returns, as evidence of an ongoing contractual agreement, or for proof that you made (or are entitled to) a major payment.

To help protect your privacy and your identity, make sure to shred financial documents before throwing them away.

(Charles Sims Jr. is president/ CEO of The Sims Financial Group. Contact him at 901-682-2410 or visit www.SimsFinancialGroup.com.)

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