Understanding the importance of updating beneficiary designations
Many Florida residents might have already created their estate plans and have all the documents signed off on. However, estate planners should keep in mind that as life changes, so should your plans for the future. One of the most common estate planning errors is neglecting to update beneficiary designations.
For example, life events such as divorce, death, remarriage and the sale or purchase of a business can affect how assets from the following types of accounts should be distributed:
- Retirement plans
- Life insurance policies
- Joint bank accounts
- Mutual funds
- College savings funds
- Brokerage accounts
Many people don’t realize that if beneficiary designations are not updated, assets can go to the wrong person, even if a will says otherwise. For example, maybe your ex-spouse is still named as the beneficiary of your life insurance policy. You probably don’t want your former spouse receiving those funds, but unfortunately this sort of thing happens in a surprising number of cases.
If a beneficiary were to die, for example, the assets in question would go into probate. The probate process is complicated and can be expensive for the family, and disputes between loved ones can arise. Choosing a secondary beneficiary in the event of the first beneficiary’s death can help to avoid future complications and disputes.
The thing to keep in mind is that accounts and plans with beneficiary designations can override the contents of a will. If Florida residents are unsure of the best way to coordinate a will with a trust or some other account with beneficiaries, an estate planning attorney can clarify these matters.
Source: MarketWatch, “Don’t make the No. 1 estate-planning goof,” Harper Willis, Jan. 23, 2014
