Have you heard the one about the youngest child of 3 being cut out of his dad’s estate on accident? Or the one where a guy’s ex-wife inherited his 500,000 dollar 401(k) because he forgot to name his new wife beneficiary?
Those are some extreme examples, but they illustrate the importance of beneficiary designations when it comes to estate planning. A good estate-planning attorney will draft trusts and wills to fulfill your wishes when you pass on. Who will be the guardian for your children? Who should get what assets? How will you handle end-of-life care and nursing homes?
The good estate-planning attorney will also let you know to update your beneficiary designations to keep them in line with the rest of your plan, but this step is often skipped over by many people. Usually beneficiary designations are made when you first opened that health savings account or IRA, or when you started contributing to that 401(k) or pension fund and then forgotten about. In the meantime life changes and the beneficiaries may become out of sync with what your true estate plan is. Generally beneficiary designations trump the other estate planning documents and that can cause problems.
It’s important to revisit your beneficiary designations on your bank accounts, insurance policies, annuity contracts, brokerage accounts, retirement accounts, and savings accounts fairly often to make sure they match your wishes.
Make sure to remember that you can name charities as well as your beloved as beneficiaries.
Don’t neglect to name contingent beneficiaries and don’t be afraid to name partial beneficiaries.
If you plan to make a minor or someone with special needs a beneficiary make sure to have also talked to an attorney about using a trust to control the funds and protect them from accidentally disqualifying them from government assistance.
Remember that spouses receive special tax advantages when inheriting retirement accounts.
Don’t inadvertently make someone a beneficiary by making them a joint-owner; consider using a power of attorney instead.
We can help you make sure your beneficiary designations are what you want them to be. Give us a call and let us help.