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Monday, April 27, 2015

Beneficiary Reviews

Everything was going wonderful with life. Archie and Veronica had just celebrated the one year birthday of their first child, Amber. Archie had received a promotion at work for a Fortune 500 company. Due to his new income, Veronica would be able to quit her part time job and be a full time mom.

Archie and his colleagues were working extra hours on an important new product. One evening after a long strenuous day, Archie and his team decided to stop for dinner on the way home. After a quick dinner, Archie was excited to see his family and play with his daughter before her bedtime. Unfortunately, he never made it. His life was taken by a drunk driver.
While you can imagine the traumatic effect on his loved ones, it was made worse by the fact that he had never updated his beneficiary form for his company group life insurance or his company retirement plan. As a young, single college grad, Archie had named his sister as his beneficiary and never thought to make the change as his situation changed. His sister was happy to accept the benefits. This is a true story.

Life insurance, IRAs, 401Ks, and annuities all transfer directly to the named beneficiary regardless of your what your will or trust says. Also, there are important tax and benefit considerations to understand when naming your beneficiaries. The relationship of the beneficiary to the account owner or insured is often a factor in determining the distribution options and taxes.
Beneficiaries should be reviewed on a regular basis and each time there is a significant life change. It is a good idea to keep all beneficiary forms or a review summary with your important estate documents. At Argus Financial Consultants, we are incorporating a beneficiary review into our ongoing review process.

When I heard the story above, it was a wake-up call on the critical importance of this for our clients. While we proactively discuss the beneficiary designations on accounts that you have with us, we need to also review those accounts that you have at work and your insurance beneficiaries. It would be a good idea if we maintained a record of these also. Do not hesitate to contact our office to discuss this further.

Friday, April 24, 2015

Financial Values in Divorce

When a couple is going through a divorce, it can be one of the most emotional and stressful times for both spouses. In addition to their own personal feelings, they are often dealing with the emotions of children or other family members. Unfortunately, this could create much vulnerability to costly financial mistakes.

One example is in the establishment of values for marital assets. It is easy to just take the current face value of an investment account. In many cases though, what you see is not always what you would keep. For example, prior to spending money withdrawn from an IRA account, you would have to pay state and federal income taxes. In addition, if those funds are needed prior to age 59 1/2, there may be penalties on withdrawals. Other assets may have considerable transaction costs associated with converting them to cash such as real estate or collectibles. A minority interest in a small business may be almost impossible to convert to usable cash. 

It is important to take the tax consequences, transaction expenses, and marketability of the assets in consideration when dividing marital assets in divorce.