If you’ve taken the time to meet with a legal professional to discuss your estate planning goals and execute a strategy designed to realize these goals — perhaps creating both a will and living trust — you should take a moment to congratulate yourself for a job well done.
After all, you were able to accomplish what an astounding number of Americans can’t owing to everything from their fear of discussing their own mortality to their inability to find time in their busy schedules.
As tempting as it can be to simply put all estate planning matters on the backburner once you’ve signed the very last document, experts indicate that this may prove to be a mistake given the existence of some incredibly valuable assets whose fate won’t be determined by the living will or trust, but rather by their beneficiary designations.
Indeed, everything from 401(k)s and IRAs to life insurance policies and pensions have their own beneficiary designations that will dictate to whom these assets should be distributed upon your demise and they are absolutely binding.
To illustrate how this can be problematic, consider a scenario in which a person divorces and remarries. Here, they may execute an estate plan that dictates everything is to be left to their spouse from the second marriage.
However, in the unfortunate event they fail to change the beneficiary designations on their retirement accounts, which still list the former spouse, this money will go directly to their ex. It simply doesn’t matter if this is contrary to the intent of the estate plan.
The good news is that you can avoid these scenarios through simple diligence. Specifically, setting aside just a small amount of time every few years to ensure that the beneficiary designations on all of your assets are still in line with your estate planning goals will go a long way toward saving your heirs time, money and unnecessary emotional turmoil.
If you would like to learn more about creating an estate plan or revisiting whether an existing estate plan meets your needs, please consider speaking with an experienced legal professional.