With the end of the year fast approaching, now is the time to fine tune your estate plan before you get caught up in the chaos of the holiday season. One area of planning that many people overlook is their beneficiary designations.
Check Your Beneficiary Designations At Least Annually
Do you own any life insurance policies? If so, have you named both primary and secondary beneficiaries for your policies?
How about retirement accounts – are any of your assets held in an IRA, 401(k), 403(b) or annuity? Or how about a payable on death (“POD”) or a transfer on death (“TOD”) account? If so, have you named both primary and secondary beneficiaries for these assets?
What about your vehicle – do you have it registered with a TOD beneficiary? And your real estate – is it held under a TOD deed or beneficiary deed?
If you have gotten married or divorced, had any children or grandchildren, or any of the beneficiaries you have named have died or become incapacitated or seriously ill since you made beneficiary designations, it is time to review them all with your estate planning attorney.
Beneficiary Designations May Overrule Your Will or Trust
Speaking of estate planning attorneys, has yours been given and reviewed all of your beneficiary designations?
It is critically important for your estate planning attorney to review your beneficiary designations as your life changes because your beneficiary designations may overrule or conflict with the plan you have established in your will or trust (unless your state law provides otherwise, but you should certainly not rely on this). Also, naming your trust as a primary or secondary beneficiary can be tricky and should only be done in consultation with your estate planning attorney.
What Should You Do?
Whenever you experience a major life change (such as marriage or divorce, or a birth or death in the family) or a major financial change (such as receiving an inheritance or retiring) or are asked to make a beneficiary designation, your beneficiary designations should be reviewed by your estate planning attorney and, if necessary, updated or adjusted to insure that they conform with your estate planning goals.
If you have gone through any family or monetary changes recently and you’re not sure if you need to update your beneficiary designations, then consult with your estate planning attorney to ensure that all of your bases are covered.
This is the second of five end of year tips. Part 1, on estate taxes, can be found here. Part 3, on checking your mental disability plan, can be found here. Part 4, on maintaining the privacy of your plan, can be found here. Part 5, on giving tax free gifts, is available here. To follow our blog, pick your favorite social media service at the bottom of this page.