Why You Need To Keep Your Benefits Up To Date


Many people are concerned with their employee benefits and their estate plans separately, but neglect to consider the two together.

That can cause problems, especially when it comes to managing financial affairs after the untimely death of a spouse. Generally, when it comes to employer benefits, the person who receives them in the event of death is determined by the beneficiary designation forms that most employee fill out as part of their job orientation, and by the company’s individual policies and procedures.

“This means that you need to think carefully about who that should be when you fill out the form and it’s vital you fill out a new one as soon as you want someone new to receive the assets,” says Stuart Ritter, a certified financial planner with T. Rowe Price (TROW) in Baltimore.

Retirement benefits like a 401(k) and other benefits like health insurance and life insurance all tend to work the same way. The money or coverage will go to the person named on the beneficiary form. However, if a beneficiary was never named, it goes to the person designated in the plan’s rules set up by the employer.

“The real issue is what happens if someone doesn’t have a beneficiary listed. It doesn’t automatically go to the spouse. The case goes into probate court and the final destination of the money (or coverage) is ultimately decided by a judge,” says Jay Berger, a certified financial planner in Traverse City, Mich. For example, some married employees still list their mother as their beneficiary because they were hired before their wedding. This means, should they pass away, their spouse may not necessarily receive the assets in question.

According to Berger, a good way to keep track of accounts and beneficiaries is to keep a list at home. “People should have a list in a file with all of their accounts, the ownership status, the account type, the account number and the beneficiary of those accounts.” It is easy to forget all the benefits that a company offers after working there for many years but this system keeps everything in one place.

It is also important to have a dialogue with employers about what the company policies say and where everything will go. “[People] need to reach out to their employer and ask about benefits until they are sure they understand how things work. The best way to do this is to repeat back, in their own words, what they think will happen when they pass away. [For instance], ‘My wife will get my 401(k) balance, my sister will get my stock, and my kids can keep their health plan coverage – which they’ll pay the full cost of – for 18 months, right?’,” says Ritter. “This is important stuff; [it] is a big part of the compensation you receive from your employer, and you want to make sure you and your family are getting the most from it.”

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