{"id":188,"date":"2011-01-07T02:42:01","date_gmt":"2011-01-07T02:42:01","guid":{"rendered":"http:\/\/vonhaefen.stevencwarren.com\/?p=188"},"modified":"2011-01-07T02:50:57","modified_gmt":"2011-01-07T02:50:57","slug":"a-financial-resolution","status":"publish","type":"post","link":"https:\/\/vhfinancialmanagement.com\/2011\/01\/07\/a-financial-resolution","title":{"rendered":"A Financial Resolution!"},"content":{"rendered":"
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With the start of the New Year, many people set out their New Year\u2019s resolutions. Financial planning resolutions should not be forgotten.<\/p>\n

Financial planning is a broad process of decisions that collectively lead to forward financial progress. Or at least that\u2019s the way it should be. Often I find that the forest is missed because of the trees. The small details get over-looked, and it\u2019s the small details that matter.<\/p>\n

One of the details that seem to get left behind is the designation of beneficiaries. Beneficiary designations are extremely important in the big picture.Assets that pass via beneficiary designation pass by operation of law.<\/p>\n

What does this mean, and why is it important?<\/p>\n

After the death of the owner of an asset, the asset will pass in one of two forms: via the will of the estate owner or via beneficiary designation (operation of law). If the asset has a beneficiary, the asset will pass to the beneficiary regardless of what the will of the decedent states because operation of law supersedes the language and wishes outlined in the will. It\u2019s imperative that beneficiaries are up-to-date and reflect the wishes of the owner of the asset.<\/p>\n

Life events should always be an impetuous to review designations. Marriage, divorce, death, and births, are all examples of life events that would trigger a review. The key is to have the asset pass as the owner wishes. For example, if an ex-spouse is still listed as the primary beneficiary, the asset will probably not pass as the owner wishes.<\/p>\n

There is another reason to utilize beneficiary designations: cost! Assets that pass via the will of the owner must go through a legal process called probate. The probate process carries administrative cost, such as court costs and legal (attorney) fees. These costs reduce the overall value of the asset. For this reason, naming the estate of the owner as the beneficiary is usually not a wise choice because the asset will then have to flow through the probate process.<\/p>\n

The most common example of accounts that pass per operation of law by the designation of a beneficiary is retirement accounts, such as 410k, 403b, and IRAs. Since these accounts typically hold a large portion of the average investor\u2019s assets, it\u2019s important to have the beneficiary designation appropriately assigned to avoid unnecessary probate. It\u2019s also important to include a contingency beneficiary or secondary beneficiary, as well. Most accounts have this capability available for the account owners.<\/p>\n

While the physical act of updating a beneficiary designation is not a difficult chore, it is something that often gets overlooked. It\u2019s important to take the time to keep the designation of beneficiaries up to date and reflecting your wishes.<\/p>\n

If this process seems confusing or overwhelming, it would be wise to discuss the topic with a fee-only financial advisor. If you are searching for a financial advisor, www.acaadvisors.org<\/a> is a great place to start.<\/p>\n

Image credit: Stuart<\/a><\/em><\/p>\n

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