When estate planning, it is important to pay attention to beneficiary designations, which determine who will receive your assets when you die. This is often one of the most overlooked aspects of estate planning, but it can be one of the most important.
What are beneficiary designations?
A beneficiary designation is an estate planning document that designates who gets to receive your assets when you die. This can include items such as life insurance policies, retirement accounts and bank accounts.
How do these documents work?
Usually, when you open a financial account, you will be asked to designate a beneficiary. You can do this at the time of opening the account or at any time thereafter. You can usually change your beneficiary designation by contacting the financial institution and requesting a change. In some cases, you may need to fill out a new form.
It is important to keep in mind that beneficiary designations take precedence over your will. This means that if you have not updated your beneficiary designation, the assets in that account will be distributed according to the designation regardless of what your will says.
For this reason, it is important to keep your beneficiary designations up to date. You should review them at least once a year to make sure that they are still in line with your estate plan. You may also want to review them after any major life event, such as a divorce or the birth of a child.
If you’re married, your spouse is usually the default beneficiary on most accounts. However, you may want to designate someone else as the beneficiary, such as a child from a previous marriage.
If you have minor children, you will need to designate a guardian for them in your will. You should also designate a trustee to manage any assets that they inherit. If you get divorced, you will need to remove your former spouse as the beneficiary on all of your accounts. Otherwise, they will still be entitled to the assets even if your will says otherwise.
Ultimately, beneficiary designations are an important part of estate planning. By paying attention to them, you can make sure that your assets get distributed according to your wishes.