You’ve spent years planning for your financial future, accumulating assets. If the unexpected were to happen, would your assets be given to the people that you want to get them? Will your wishes be granted?
Estate planning is a complicated topic that should be addressed by an attorney. However, one simple and important estate planning action you can take immediately is to designate a beneficiary for your financial assets. If you’ve already named beneficiaries to inherit your assets, check them periodically to make sure that they reflect current reality.
Financial assets to name and check on beneficiary designations include:
- Bank accounts
- Brokerage accounts
- Retirement accounts
- Company benefit plans
- Life insurance policies
- 529 College savings accounts
Sure, we all think that we have plenty of time to designate beneficiaries and make sure our wishes are followed. But putting it off can lead to unforeseen and undesirable consequences. If you need motivation, here’s a real-life horror story to light a fire under you.
“Dad” failed to change the beneficiary designations for his pension benefits and life insurance after his divorce, so Dad’s former wife was still the named beneficiary. Two months later, Dad died in a car crash. The Court ruled that the beneficiary designations overruled a state law that would have automatically disinherited the ex-wife. So, the ex-wife received the money, and the kids were handed the bills for an unsuccessful legal fight.
Divorce is not the only situation where failing to turn in or update beneficiary designation forms can cause heartache for your intended heirs—it’s just the most obvious situation. You get the idea. When things in your life change, you may need to refresh your beneficiary designations.
- Probate – Another big reason to designate beneficiaries: it avoids probate. Also, consider naming contingent beneficiaries. These are individuals who stand in line behind your primary beneficiaries.
- Living Trusts and Wills – As a general rule, whoever is named on the most recent beneficiary form will get the money automatically when you die—regardless of what other documents might say.
- Check – Review your designations at least once a year or whenever significant life events occur. It usually takes only a few minutes to conduct a checkup and make any needed changes. Often you can access the necessary forms online.
Don’t wait if you want your wishes to be granted.