Choosing beneficiaries is an important aspect of estate planning, but it’s one that sometimes gets glossed over. To make sure your wishes are carried out, it’s important to consider three key issues when naming beneficiaries for life insurance policies, investment accounts and other assets.
1. Consistency Across Estate Planning Documents
Your beneficiary designations should be consistent with the wishes you’ve laid out in your will and trusts.
Inconsistency can arise when, for example, your will says one thing about how your estate should be distributed and your life insurance beneficiary designation says another thing. When this happens, there’s a good chance that your will expresses your actual wishes – but that does not mean that your wishes will be carried out.
In many cases, beneficiary designations override other estate planning documents. As a result, your assets may be distributed based on the beneficiary designations you have selected, regardless of what your will says.
Tip: Check your beneficiary designations and make sure they are consistent with your estate plan as a whole.
2. Providing for Minors
If you have young children, you want to make sure they will be provided for no matter what happens to you. To achieve this goal, you may want to name a minor child as a beneficiary in a life insurance policy or investment account. However, there are other practical issues to consider.
If a minor inherits assets, those assets may be controlled by a guardian until the minor reaches the age of majority. By naming a guardian in your will and establishing a trust, you can gain better control of what happens to your assets.
Tip: Talk to an estate planning attorney about naming a guardian and establishing a trust for your minor children. Also discuss estate planning issues for children with special needs.
3. Updates after Life Changes
Many people give little thought to beneficiary designations after they fill out the initial paperwork. This can be a huge mistake. Over the years, your personal and financial situation will change. It is important to update your beneficiary designations accordingly.
This is especially true after a divorce or second marriage. When settling on a divorce agreement, it’s important to consider life insurance policies, investment accounts and other assets with beneficiary designations. Then it’s important to make sure beneficiary designations and other estate planning documents are updated to reflect this.
Tip: When getting a divorce, remarrying, having another child, or going through other major life changes, review your beneficiary designations and make updates as needed.
Contact Skinner Law for assistance with beneficiary designations and all your estate planning needs.