The Importance of Keeping Your Beneficiary Designations Updated
Have you designated the right beneficiaries for your assets? If you have experienced any major life events, maybe not.
Your family’s needs are constantly changing due to life events big and small. As your family’s needs change, so should your beneficiary designations, along with the rest of your estate planning documents.
Beneficiary Designations Supersede Wills and Trusts
Many people assume that having a Will or Trust ensures that their final wishes will be carried out. But the fact is, the beneficiary designations you make on various financial accounts and other liquid assets will supersede any contradictory terms in your Will or Trust.
For example, suppose you have a life insurance policy and name your spouse as the sole beneficiary. Sometime later, you get divorced and create a Will that states that your children are to receive all of your life insurance proceeds.
In this case, you may be surprised to know that your ex-spouse, not your children, will receive the proceeds from your life insurance policy. This is because the beneficiary designation on your life insurance policy, which was never changed to reflect your children as the beneficiaries, supersedes the contradictory terms in your Will.
This is why it is important to review and update your beneficiary designations often to make sure that they align with your current estate planning wishes.
What Assets Pass According to Beneficiary Designations?
There are many assets that will pass according to the beneficiary designation on the account, rather than the terms in your Will or Trust. These include:
- Life insurance policies;
- Brokerage and investment accounts;
- Retirement accounts, like IRAs and 401ks;
- Annuities;
- Pensions; and
- Trust funds
Considering the fact that for a growing percentage of Americans, these types of assets represent the biggest components of their overall wealth, it is critically important to keep your beneficiary designations updated.
How Often Should I Review My Beneficiary Designations?
Relationships can change and it is not unusual to find that your beneficiary designations are out of date. Periodically reviewing and updating your beneficiary designations is extremely important, particularly after significant life events, such as the birth of a child or grandchild, the death of a beneficiary, marriage, divorce, or starting a business.
As a rule of thumb, you should review and update your beneficiary designations at least once every 2-3 years, and after every significant life event. Fail to do so and you risk passing your assets on to unwanted or ineligible beneficiaries, such as an ex-spouse, deceased relative, or a loved one who cannot inherit from your estate without jeopardizing their eligibility for much needed public benefits.
Contact a Virginia Estate Planning Attorney For Help Updating Your Beneficiary Designations
If you have not reviewed your beneficiary designations lately, and updated them if needed, now is a great time to do so. Reviewing and updating your beneficiary designations where needed can save you money in taxes, avoid legal difficulties, and ensure that your assets go exactly where you want them to.
To take action, talk to an experienced estate planning attorney. Together, you can come up with a plan to periodically review and update your beneficiary designations that works best for you and your estate planning goals. Contact us at (703) 553-2577 or use the contact form on our website.
The information on this site is for general informational purposes only. The information presented in this site is not legal advice or a legal opinion. You should seek the advice of legal counsel of your choice before acting upon any of the information in this site.