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On money

Take time to review your beneficiaries annually

Published October 19, 2003

Have you checked your beneficiaries lately?

Everyday life has a way of making people change their minds about who it is they want to inherit the wealth they leave behind. People marry, divorce and have children. They get angry at their grown children and decide not to leave them a dime. They mellow and change their minds.

But they don't always change the beneficiaries of their insurance policies, retirement plans and bank accounts. Emotional ups and downs are one thing. Legalities are something else.

That makes it a good idea to take time once a year to review who it is that you have chosen to benefit - and who it is that you have left out. Remember that naming a beneficiary for an account or an insurance policy means the proceeds go directly to that person and do not pass through your will. Your will may say "I leave everything to my dear wife," but she won't collect the life insurance payout if somebody else is named as the beneficiary.

"Many times the beneficiary designations run counter to people's estate plans," said lawyer Tate Taylor of Trenam Kemker in Tampa. "They complicate the ability to minimize estate taxes in certain cases."

In addition to a primary beneficiary, each account or policy should name a secondary or contingent beneficiary. That person will inherit if your primary beneficiary dies before you do. Be sure the designations reflect your wishes. If you named your children as primary beneficiaries and one of them dies, do you want that child's share to go to his or her children or to be divided among your living children? You need to spell it out. If you have questions, call the insurance company or the institution holding your assets.

One reason to do a review is that it is easy to leave somebody out unintentionally. Suppose that instead of giving your son a share of your overall estate, you made him the beneficiary of your company life insurance. If you leave the company and discontinue the insurance, your son is left out in the cold.

Sometimes the law limits beneficiary choices. For example, spouses have to waive their legal rights for someone else to be the primary beneficiary of a pension plan. And minor children cannot own property directly; a trustee or guardian has to be appointed.

Some designations are likely to provoke a legal dispute, such as trying to bypass your spouse, who is legally entitled to a 30 percent share of your estate. Leaving an ex-spouse as a beneficiary after a divorce also might be contested unless it was done as part of a divorce agreement.

"People are trying to use these things as probate avoidance devices, which is commendable, but they can have unintended consequences," Taylor said.

Q. How long is a bank cashier's check good? I have received conflicting answers.

That's because you are likely to find some variation in policy from one bank to the next.

"The checks are good forever if the issuing bank has the documentation," said Monica Martines, spokeswoman for Third Federal Savings. "We keep documentation for seven years and have honored much older bank checks that weren't too high on occasion. Without documentation, we don't know if the check was reported lost, reissued and cashed."

Under Florida law, a cashier's check is presumed to be unclaimed property after five years if the bank has not received any written communication from the owner. The money has to be turned over to the state, but it still belongs to the person whose name is on the check and it can be claimed at any time.

Q. Just what is the Consumer Price Index and to what does it apply?

The CPI, as it is known, is the government's way of measuring the price of a market basket of goods and services. Changes in the index give us the rate of inflation. The numbers may be different from your personal rate of inflation because nobody buys exactly the same things in the same proportions as the items in the government market basket.

The government uses the CPI to adjust Social Security benefits, economic statistics and IRS tax brackets, among other things. The business world sometimes uses it in multiyear contracts such as office leases to increase the price each year. And inflation is often a point of discussion in salary negotiations.

- Helen Huntley writes about investing and markets for the Times. If you have a question about investments or personal finance, send it to On Money. We'll try to answer those we think are of greatest reader interest. All questions must be submitted in writing, but readers' names will not be published. Send questions to Helen Huntley, Times, P.O. Box 1121, St. Petersburg, FL 33731.

[Last modified October 19, 2003, 02:03:50]

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