Most people have at least one asset that includes a beneficiary designation (i.e, a life insurance policy, 401(k), IRA, annuity, etc.) It is important to remember that a beneficiary designation is the “trump card” and will overrule your will, your trust, or any other document that tries to direct to whom these funds are paid at the time of your death.
Keep Beneficiaries Up to Date!
That is why it is extremely important to keep these designations up-to-date and to retain copies in your personal files. It is not unusual for an employer to lose or misplace a beneficiary designation that you previously filed. If your family cannot find a copy of a more recent designation in your personal papers, then the last designation on file with the employer will control who gets the funds.
It is not uncommon for people to forget to update these designations after a divorce. When the person dies, often many years or decades later, the ex-spouse gets an unexpected windfall because he or she is still named on an old life insurance policy or IRA.
Minor Beneficiaries? Proceed With Caution!
Even more important is to seriously consider whether to name a minor child as a beneficiary. If you do, once you are deceased, that child will get the funds on his 18th birthday – regardless of the amount of money involved or his maturity level to handle those funds. It is often much safer to have your trustee or your estate named as the beneficiary and then to have provisions in your will or trust for someone to manage the funds until the child is a more suitable age.
Enlist the Help of a Professional!
These scenarios illustrate how important it is to have professional assistance when planning your estate. A professional will ask questions that you may never have thought of.
Interested in taking the next step? Please Contact Us!