REVIEW: Avoid a Big Tax Hit by Properly Naming Beneficiaries

While this article does not garner a strobe light level of attention to the general investment audience, it addresses a very fundamental issue that can inversely affect your net worth and your financial intentions.

It highlights how a couple with over a million dollars in their tax-deferred account would not have been able to distribute their assets upon their deaths and in accordance to their wills because the beneficiary designations on their accounts did not identify contingent beneficiaries. The couple had a child with special needs and they wanted to leave the money to their child without special needs to distribute and oversee the assets in the interest of both children. Their advisor made the correct changes to reflect those wishes on their beneficiary forms.

In effect, the IRA is like a will and as such the client beneficiary designation form is just as important a legal document as a will or trust. Often, more of the client’s assets are controlled by this form than by his will. An improperly drafted (or missing) beneficiary designation form could cost a client’s family dearly in taxes and increased settlement costs.

Before client meetings at McLean, we review all beneficiary designations to confirm they are in agreement with our client’s estate plan and will. It’s also important to note any changes regarding the family structure. It’s not uncommon for us to receive documents with a former spouse still listed as a beneficiary or missing beneficiary designations. This article reinforces a larger and common theme.

While there are many financial variables outside of your control (e.g., short-term market movements), there are as many variables within your control that, if diligently taken care of, can have a large impact on your overall investment success. If you have any lingering questions about this, please feel free to reach out to us and we would be more than happy to help and/or confirm that you are set up accordingly.


McLean Asset Management Corporation (MAMC) is a SEC registered investment adviser. The content of this publication reflects the views of McLean Asset Management Corporation (MAMC) and sources deemed by MAMC to be reliable. There are many different interpretations of investment statistics and many different ideas about how to best use them. Past performance is not indicative of future performance. The information provided is for educational purposes only and does not constitute an offer to sell or a solicitation of an offer to buy or sell securities. There are no warranties, expressed or implied, as to accuracy, completeness, or results obtained from any information on this presentation. Indexes are not available for direct investment. All investments involve risk.

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