Even if you’ve updated your wills, power of attorney, trusts and documented your end-of-life wishes, you haven’t finished with your estate plan, says a recent article, “On the Money: Do not disinherit your loved ones” from the Aiken Standard.
Forgetting to update beneficiary designations for retirement plans at work, IRAs, life insurance policies, mutual funds, bank accounts, brokerage accounts, annuities and 529 college savings plans can wreak havoc, with even the best estate plan.
It’s always a good idea to review these designations every few years and update them to reflect your current life. Each account with a beneficiary designation should also have a contingent or secondary beneficiary who will become the primary beneficiary, in case the primary beneficiary dies or declines to accept the asset.
One common occurrence: one child is placed as a beneficiary on an account, thereby invalidating the parents’ will and effectively disinherit their siblings.
When you name a beneficiary on an IRA account, designate the specific individual by name, rather than by class, such as “all my living children.” Be careful to use the correct legal name. Families where multiple people share names often lead to problems when distributions are being made.
There are other times to review beneficiary designations:
Divorce or remarriage. If a former spouse was listed as a beneficiary of a life insurance policy, you’ll need to get a beneficiary change form to the issuing insurer. Naming your new spouse in your will won’t work.
You’ve started a new job and have rolled over your old 401(k) to an IRA or your new employer’s 401(k). If you want to keep the same beneficiary designations, name them on the new account.
Your primary beneficiary passed away. If you have a secondary beneficiary, that person is now the primary, but you should make sure ongoing designations are in line with current wishes. You’ll also need to name a new secondary beneficiary.
The financial institution changes ownership. Check with the new company to be sure your beneficiary designations are still what you want them to be.
You have a new child or grandchild. Children can’t inherit until they are of legal age, so check with your estate planning attorney to understand how you can provide for your new child or grandchild. Leaving assets to a minor may require the use of a trust.
A beneficiary becomes disabled. Individuals who have special needs and receive federal support have limits on assets. If a beneficiary becomes disabled, an estate planning attorney can create a Special Needs Trust, naming the trust as a beneficiary and keeping any future assets from being countable and making them ineligible for benefits.
To learn more about estate planning in the East Valley, Gilbert, Mesa and Queen Creek, schedule your free consultation with Attorney Jake Carlson by using one of the links above.
Reference: Aiken Standard (Jan. 7, 2023) “On the Money: Do not disinherit your loved ones”