A will is used to direct the distribution of assets to those family members and other people in your family who are most important to you. But don’t overlook the other two common accounts that require separate planning through beneficiary designation forms. These include life insurance policies and retirement plan accounts.
Without proper designation of a beneficiary that is regularly updated as your life circumstances change, it is possible that these could pass to the wrong person.
A great example is leaving a former spouse on the beneficiary designation form of your life insurance policy and failing to make an update if you divorce.
This means that your previous spouse is legally entitled as the properly listed beneficiary to recover those assets. Life insurance policies provide for payment based on the face value of the policy to your designated or contingent beneficiaries.
You can also use more advanced structuring strategies, such as having the proceeds held by the insurance company or having the policy owned by a trust. When it comes to retirement plan accounts and employee benefits, this can include 401(k) plans and IRAs.
You’ll need to complete the beneficiary designation forms with each of those individual companies to ensure that they stay updated. Put an annual reminder in your calendar to go back and review this information.
If it’s been some time since you last looked at your beneficiary designation forms, you’ll want to contact the company directly and ask to see versions of your most currently-updated materials. You can work with the retirement or life insurance company directly to edit those documents if needed.
Do you need the other components of an estate plan, like a will or trust? Our Pasadena estate planning lawyers