If you haven’t looked at the paperwork for your life insurance policies, bank accounts, retirement accounts, investment accounts and any other asset that names a beneficiary, right now would be a good time to take a look—especially if you haven’t done so in years. The number of horror stories of assets going to untended people would surprise you. It’s an easy fix, but is all too often forgotten.
MarketWatch’s recent article, “Make this estate planning move right now: Check your beneficiary designations,” explains how the Fifth Circuit Court of Appeals reversed a trial court ruling by finding that a pension plan administrator didn’t abuse her discretion in determining that a deceased plan participant’s stepsons weren’t considered his “children” under the terms of the plan. As a result, the deceased participant’s siblings, not his stepsons, were entitled to inherit the plan benefits in Herring v. Campbell (5th Circuit 2012).
You may love your stepchildren as if they were your own and wish to take care of them. However, if their names don’t appear on the beneficiary form of a particular asset, they will not receive anything. Your estate planning documents will not override a beneficiary designation. If that wasn’t enough of a reason to do a beneficiary check-up, here’s another: by designating beneficiaries (other than an estate), the assets do not have to go through probate.
Aligning your beneficiary designations with your estate plan is a simple way to take care of your family. Speak with your estate planning attorney and financial professional to ensure you’re aligning these accounts correctly. For instance, if in your estate plan you created a trust for the benefit of your children, you’ll want to ensure the trust is named as a beneficiary. There’s another issue to watch, as well. You’ll want to ensure you receive verification from the financial institution that the asset has been aligned correctly in their records. It’s always better to address any errors now rather than in the middle of a crisis.
There could also be other planning opportunities as you age, as well. That’s why it’s important to work with your estate planning attorney on an ongoing basis to regularly review changes in the law, your assets and family situation to see if any changes should be made to your plan. If someone you named as guardian or trustee passes away, your estate plan may need to be updated. Have a new grandchild? Your estate planning attorney and financial professional might recommend considering inherited IRA planning. While that will mean updating the beneficiaries on your designation form, it can also be an excellent generational wealth planning tool.
There are certainly many things to consider when creating your estate plan. However, while beneficiary designation forms can make things simpler when you pass away, you have to ensure it’s all been done correctly. Work with experienced estate planning and financial professionals to align your assets, verify the correct alignment, and track any changes in the law, your assets or your family situation over time.
For more information on the importance of aligning, verifying and tracking assets, explore our website and contact us to schedule your consultation today!
Reference: MarketWatch (June 30, 2017) “Make this estate planning move right now: Check your beneficiary designations”