Updated: Jun 14
At Peak Wealth Planning, we encourage clients to review their retirement account and life insurance beneficiaries each year. This spring, I reviewed my account beneficiaries and what I discovered cemented my beliefs on the importance of this practice.
Several years ago I set up a trust and believed I had updated my beneficiary designations on my retirement accounts and life insurance to name my partner as the primary beneficiary and my trust as the contingent beneficiary. This is what my attorney had recommended.
What I learned surprised me.
For my SURS RSP, my partner was named primary beneficiary, but my revocable living trust was not named as the contingent beneficiary. An incorrect contingent beneficiary was named. I was able to login to the SURS website and fix that oversight. I did verify that both beneficiaries were properly named on my IRA account.
I discovered there was a life insurance assignment mix up.
I have a large term life insurance policy. Several years ago I had a lot of debt as a real estate investor and insurance was required as a condition for borrowing by my bank. They wanted insurance to pay off the loans in case I passed away. I sold the properties back in 2009 and decided to keep the insurance since the premium was quite low.
I called the life insurance company and they confirmed my beneficiaries were listed correctly. But, I was surprised to learn an assignment of the policy’s value made to my old real estate LLC in 2005 was still in place. This meant that the LLC would be first in line to receive my life insurance, even before the primary beneficiary. I checked my records and told the life insurance company that the manager of the LLC had mailed a letter in 2015 requesting a release of the assignment. The representative said the insurance company had in fact received the letter, but that the release was supposed to be on a company specific form. The representative emailed me the form.
Now I need to locate the manager of the LLC and have him sign the proper release form. Fortunately, this will be smooth since he lives here in town. I believed all of this had been resolved in 2015. Had I not called to verify my beneficiaries, the assignment would stay in place and create a tangled mess for my executor if I were to pass away.
Have you reviewed your life insurance beneficiaries recently? Major life changes, like marital status or birth of a child, are typical triggers for reviewing these types of documents. But if it has been a couple years, it delivers peace of mind to sit down for 20 minutes and call your insurance provider. You never know what you may discover.
Peak Wealth Planning works with individuals with $2 million or more saved and need help from a wealth manager.
Peak Wealth Planning specializes in helping high-net worth individuals and families plan for the future.
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About the Author
Peter Newman is a Chartered Financial Advisor (CFA) and president of Peak Wealth Planning. He works with individuals nationwide that have accumulated wealth through company stock, ESOP shares, real estate, or running a business. Peter applies his unique background to help clients achieve their specific goals and enjoy peace of mind.
Peak Wealth Planning provides concierge services to meet your wealth management needs. Services include: financial planning, investment management, esop diversification, retirement income, insurance, and estate planning advice. Peak Wealth Planning is a fee-based financial advisor based in Champaign, Illinois, and Fraser, Colorado.