Beneficiary designations are a powerful tool for estate planning. Adding beneficiaries to your accounts gives you the opportunity to directly distribute assets after your death and helps your family avoid the expense and stress of probate. It’s extremely important to keep the names of the person or people you would like to benefit from your insurance policies, pension plans, individual retirement plans, annuities, and other investments up-to-date. We discuss this annually with our clients and have them work with their estate planner or our estate planning colleagues to make sure everything is in order. The events in your life are constantly changing and your beneficiary designations may periodically need to be reviewed and updated.
Here are a couple of reasons why checking your beneficiary designations regularly is so important:
- A beneficiary designation always trumps your will. For example, if your children are named in your will, but your ex-spouse is still listed on your pension plan, your ex-spouse is entitled to that money, regardless of your family’s wishes.
- If you don’t name beneficiaries for your assets, they may be subject to probate. This can be an expensive and lengthy process and a court may not honor your original intentions. One of the major benefits of beneficiary designations is that it completely bypasses expensive court proceedings for any account with a named beneficiary.
- Family relationships can be complex, and beneficiary designations allow you to ensure the future wellbeing of all members of your family. Without beneficiary designations, your wishes may not be carried out as written, since a probate court or local statute may determine the final distribution of your assets.
- Your estate plans should keep up with your life. By regularly updating your beneficiary designations, you ensure that your estate plans keep up with major events like births, deaths, relationship changes, and major financial decisions.
- Naming contingent beneficiaries is just as important as naming primary beneficiaries. In the event a primary beneficiary passes away before you, you will have made sure your assets will go to the recipient(s) you want. Some experts suggest naming two contingent beneficiaries for each primary one, just to be safe.
When designating your beneficiaries, there are a few important things you want to keep in mind.
- Make sure that you clearly identify each beneficiary by name and relationship, instead of imprecise phrases like “all my living children” or “as per my will.” This will ensure that account custodians are able to correctly identify your beneficiaries and disburse funds quickly.
- Consider specifying percentages instead of amounts, so that account value changes don’t affect your wishes.
- Discuss your estate plans and beneficiary designations with your family members, so that everyone is aware of your wishes.
We specialize in retirement and estate planning issues. In working with many clients who have been referred to us over the years, we have seen examples of what can happen when beneficiary designations have not been updated. We oversee many retirement and investment accounts, and we make it a point to ensure our clients get the outcome they intended.
We would love the opportunity to get to know you and give you a chance to learn how working with our dedicated financial consultant would work. Or course, the consultation is FREE and there is absolutely no obligation on your part. Contact us today to schedule a visit. We look forward to meeting you.
P.S. If you already have someone whom you trust with your life savings, we wish you well. However, if you’re unsure about “being on track”, give our office a call.
