The Wall Street Journal had a good article earlier this week, “The Pitfalls of ‘Designated Beneficiaries’ for Mutual-Fund Accounts.” Although the title suggests it is tailored to mutual funds, the advice in the article is good for most people to consider for their estate planning. Most of my clients have some type of account with a beneficiary designation. It is important that you keep your beneficiary designations up-to-date, even after you’ve signed your documents.

What Are Designated Beneficiaries

Many types of retirement accounts and insurance policies allow you to choose who gets the money when you die. The advantage of using a beneficiary is that the funds go to that person without having to go through a probate process with a court. And unlike a will, it is easy to change the beneficiary. It often takes a quick call and signed form and the beneficiary is changed. This especially useful when there are life-changing events (birth, death, divorces).

What to Watch For

Although they are easy to use, many people do not change them when they should. I try to remind my clients after they’ve signed their estate plans to check the beneficiary designations. After spending all that time with an attorney creating a will, you don’t want to have your designated accounts resulting in a totally different outcome than what you intended. For example, if you want to leave money to someone in a trust from one of the accounts. You need to make sure that the beneficiary designation properly names the trust. You shouldn’t just say to “my son Jason’s trust.” It should be the actual name, the “Jason Smith Trust, dated July 10, 2019.”

Another concern is that if your beneficiary dies before you do, then the assets will go to your estate. If there is a probate estate opened, then the assets will be dealt with by the Court. Although it’s not necessarily a painful or drawn out process, it could be.

Since they are easy to update, there’s no good reason not to set a reminder for yourself.

Quick Tip: Check in on your beneficiary designations on a set schedule.

Next Steps

If you haven’t checked your beneficiary designations since you signed your will then now is the perfect time to do it. And if you think that things have changed in life and you may want to update your will as well, call my office to set up a meeting and we can review the best options for you – (877) AMAYERS.

Andrew Ayers
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I work with business and estate planning clients to craft legal solutions to protect their legacies.