Births, deaths, marriages, divorces – important events and people change throughout your life. Have your beneficiary designations changed accordingly? Your insurance policies, pension plans, individual retirement plans, annuities and other investment accounts require that you select one or more beneficiaries in the event of your death.
If you believe your will is the only document you need to keep current, you may be surprised to learn that a beneficiary designation trumps a 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 legally entitled to that money. That’s why a thorough review of beneficiary designations should be part of the finalization process during a divorce.
Unmarried people often name their parents or siblings as beneficiaries but fail to make a change after their marriage or birth of a child, which can leave a young family financially at risk if that spouse should die. On the other hand, if you don't name beneficiaries for your assets, they may be subject to probate. Rather than those assets passing directly to your heirs, they will be lumped into your estate and dispensed by the court during probate. As a result, the assets may be subject to additional taxes..
Naming contingent beneficiaries is just as important as naming primary beneficiaries. In the event a primary beneficiary passes away before you, you 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. For example, you can name your spouse as your beneficiary, with each of your children as a contingent beneficiary.
If you haven’t reviewed your beneficiary designations for your insurance, banking and investment accounts, this is a great time to do so. You can make it part of your annual review or during the preparation of your tax returns. We are happy to help review your accounts and make any necessary changes to ensure your assets reach your intended beneficiaries at your death. Call our office to schedule an appointment.