1. Life and circumstance changes. Changes in marital status, birth, adoption or death of an intended beneficiary are all triggers for review and likely change of beneficiary designations. In other cases, the need for change is more subtle and arises gradually. For example, assume you have two IRAs and designate your spouse as primary beneficiary on each and one child as contingent beneficiary on one account and another child as contingent beneficiary on the other account. Your goal is to treat the children the same after you and your spouse are deceased. Initially, the contributions and earnings are comparable and the accounts are nearly equal. However, at some point you modify the investments and one account becomes significantly greater than the other. You do nothing because you intend to withdraw from the account with the larger balance or modify the investments in the other account. Your rebalancing efforts could take years to fully implement, but at your annual review you could immediately achieve the intended equal gifting by changing the beneficiary designations on the accounts to make both children the beneficiaries on each IRA.

You should also consider changes in the intended beneficiary's circumstances. Some charitable organizations may have modified their focus or gone out of existence. Charities that you favored at age 35 may not have your support at age 55. Individual beneficiaries may have developed credit issues. Your intent to benefit the individual may not have changed, but perhaps a trust would better serve the beneficiary's needs and provide you with peace of mind.

2. Operates within the rules of the applicable plan. Retirement plans, such as profit sharing and 401(k) retirement plans with benefits based on individual accounts, generally fall into one of two types: either not subject to joint and survivor annuity rules, or subject to the survivor annuity rules. Plans that are not subject to the joint and survivor annuity rules require that the benefit be paid 100% to the surviving spouse in the event of the participant's death, unless the spouse consents in writing to designation of another beneficiary. Retirement plans that are subject to the joint and survivor annuity rules require that in the event of the participant's death prior to retirement, the surviving spouse must receive an annuity benefit equal in value to at least 50% of the account balance at the participant's death, unless the surviving spouse waives the right to the annuity and consents to an alternate beneficiary. You must understand the impact of these rules on your beneficiary designation. For example, assume you divorce and revise your beneficiary designation to name your children as the beneficiaries of your 401(k) account but after your remarriage, you do not change the beneficiary designation. In the event of your death prior to retirement and in the absence of the requisite spousal consent, the plan will either pay 100% of the account to your surviving spouse or at least 50% of the account to the surviving spouse. You must be certain that your beneficiary designation will accomplish your goals within the rules that govern the particular retirement account. Note that prenuptial agreements do not constitute valid spousal consents.

3. Proper execution. Failure to properly execute or provide a required acknowledgment may invalidate a beneficiary designation. For example, the spousal consents referred to above must either be witnessed by a plan representative or acknowledged by a notary public or else the consent is invalid. Insurance companies have their own requirements. In each instance the formalities must be satisfied.

Beneficiary designations control the disposition of a large and growing part of your wealth. You must keep them current and verify with the IRA custodian, insurer or plan sponsor that the form and manner of completion are correct. Just as you have established an annual routine to make sure your smoke detectors are working properly, set a time for annual review of your beneficiary designations. Do not wait for a life event to trigger your review and necessary changes. If Easter is the time for renewal, make it the time every year that you review your beneficiary designations and make any changes that are necessary to accomplish your goals.