Between work and personal commitments, all of us may let some important things slide from time to time. Even though we know we need to get to them, they seem easy enough to put off until tomorrow or the next day. It’s easy to put off updating beneficiary designations on retirement accounts and other accounts. Staying on top of your beneficiary designations will ensure that your assets are transferred to the person or charity of your choice after you pass away.
Discuss Your Estate Plan With an Experienced Lawyer
At Surprenant & Beneski, PC, we work with our clients to help them remember to review their beneficiary designations and other estate planning documents periodically. Whether you need to create a comprehensive estate plan or you have questions about beneficiary designations, we are here to help. Contact us today to schedule your initial consultation with one of our skilled estate planning lawyers. Below, we will discuss five critical reasons for the importance of updating beneficiary designations.
1. Beneficiary Designation Accounts Often Contain Significant Assets
For many of us, the bulk of our retirement savings is in a 401k or IRA account. When we sign up for life insurance, health insurance, or 401k account, we will be required to list a beneficiary who will receive the proceeds in that account should we pass away. As a result, updating beneficiary designations after a significant life change is crucial in estate planning. Failure to update the beneficiary designation could result in your hard-earned assets being distributed to someone you wouldn’t choose to receive them.
At Surprenant & Beneski, PC, we help clients prepare a thorough list of their accounts with beneficiary designations. After seeing an inventory of all of their assets in one location, you may be surprised at the amount of resources in accounts that use beneficiary designations. In some cases, the bulk of a person’s assets will be transferred using beneficiary designations. Common types of beneficiary accounts that are included in estate plans include the following:
- traditional and Roth IRAs
- company-sponsored retirement plans, including 401K, 403b, 457, SEP-IRA, SIMPLE-IRA, pensions, and Keogh
- life insurance policies
- college savings plans
2. Beneficiary Designations Supercede the Terms in Your Will
Sometimes people assume that their last will and testament will trump all other documents they’ve signed. They may be surprised to learn that a beneficiary designation on a bank, life insurance, or retirement account supersedes the terms in a will. Assets with beneficiary designations are not a part of the probate estate, and Massachusetts probate courts will not distribute them to beneficiaries.
Instead, the assets in a beneficiary account will pass directly to the person or charity listed as the primary or secondary beneficiary. Additionally, beneficiary designations take precedence over divorce decrees, trust, and any other type of formal, legal document. It doesn’t matter which document is the most recent, and the beneficiary form will supersede any other documents or records.
3. Updating Beneficiary Designations Reflects Your Goals
The main goal of the estate planning process is to ensure that your assets are distributed according to your wishes. Our lives can change fast, whether that means divorce, remarriage, birth, adoption, or the death of a loved one. Checking your beneficiary designations from time to time will ensure that your assets are transferred to the person you want to receive them, especially after one of these significant life events.
Suppose that a person becomes divorced and remarried later in life. The person forgets to update his beneficiary designation from his ex-wife to his current wife. As a result, an ex-spouse from whom the person divorced 20 years ago would receive the assets in the account. The current spouse would not have any legal recourse to obtain the assets.
In another scenario, suppose a parent decided to give her daughter the remaining assets in her retirement account. The mother names the firstborn child as the beneficiary. Ten years pass by, and she decides to adopt another child but forgets to update the beneficiary designation. Even though the mother would have liked both children to inherit the assets equally, they won’t.
4. Transfer Assets Outside of The Probate Process Effectively
The ability to transfer assets outside of the probate court is considered a benefit and a unique reason to take advantage of accounts with beneficiary designations. Using beneficiary designations is a great way to allow your loved ones to avoid going through the often time-consuming and expensive probate process.
However, beneficiary designations aren’t so great when the owner of the assets forgets to change the beneficiary designation when needed. Beneficiary designation mistakes are often irreversible, so it’s crucial that you update your beneficiary designations to reflect your wishes accurately.
5. Avoid Legal Challenges And Complications
The importance of updating beneficiaries on your accounts cannot be understated. Failure to update a beneficiary designation could result in your spouse or children not receiving the assets they need to survive financially after you are gone. Updating the beneficiary designation will prevent your loved one from missing out on inheriting your assets entirely.
If you would like to avoid legal challenges and complications after you pass away, we recommend updating any beneficiary designations immediately after a change of family or life status. We also recommend reviewing your beneficiary designations periodically to ensure they haven’t become incorrect or outdated.
Contact a Beneficiary Designation Lawyer Today
At Surprenant & Beneski, PC, we understand how busy life can be. That’s why we offer our clients comprehensive estate planning services. We send our clients periodic reminders that it’s time to review their estate plan and potentially update beneficiary designations. Our legal team builds relationships with our clients to help them meet all of their estate planning goals.
Do you have questions about your estate plan or beneficiary designations? If so, our experienced Southeastern Massachusetts estate planning lawyers are here to help. Contact us today to schedule your initial consultation.