Will or No Will, Check Your Beneficiary Designations

Just as experts recommend checking the batteries in your smoke detectors the two times you change your clocks each year, setting a reminder each August for #NationalMakeAWill month is a great way to ensure that your documents are in order and your estate is set to be distributed the way you intend.

Unfortunately, unexpected natural disasters, tragic accidents or sudden health events happen—and more often than you might expect.

It is prudent to periodically:

1. Revisit designated primary and secondary beneficiaries on any financial accounts and life insurance policies.
2. Consider assigning a trusted contact with whom your financial institution may share information on a limited basis or contact to help reach you in an emergency.
3. Update any asset schedules referenced in a will.
4. Confirm that assets you wish to be held in a trust are titled in the name of the trust to avoid the probate process.

BENEFICIARY DESIGNATIONS MAY CONTROL ASSET DISTRIBUTIONS

If you have not written a will, periodically revisiting the beneficiaries on any financial account or life insurance policy is a simple way to designate who you wish to receive your assets.

For example, it’s common for many to name their spouse as primary beneficiary when they open accounts yet forget to change the designation if they divorce.

Even if you’ve written a will, you’re not out of the water. Beneficiary designations can control how certain assets are distributed upon the asset owner’s death. So, if you decide to make a change to how those assets are distributed in your will, you should make sure you designate beneficiaries on accounts to align with those wishes.

Should you be reaching advanced age and have adult children, it’s important to consider the likelihood of outliving all of your family members. Many choose to designate multiple beneficiaries, which may include children, grandchildren, other family members or organizations that are important to them.

On the other hand, should you have young children, it’s important to think through how you wish to transfer funds in the case of your premature death. Life insurance benefits may not be distributed to minor children until they reach the age of majority, which is typically 18, but can differ by state. To avoid lengthy delays in gaining control of life insurance proceeds, an alternative option could be naming a revocable living trust as the beneficiary.

After working with an attorney to draft a trust document unique to your situation, specific assets held in the trust should be retitled in the name of the trust, to avoid their going through the probate process (e.g., real estate).

CASE STUDY IN DESIGNATING CONTINGENT BENEFICIARIES

Our client Fred had already lived a long and rich life into his nineties when he met with his estate attorney to review his estate planning documents and financial account beneficiary designations.

Fred’s wife had passed away over a decade before, so he had previously updated his paperwork, naming his daughter and grandson as the primary and contingent beneficiaries.

Fred and this trusted advisor discussed if there were any organizations or causes important to Fred that he would wish to help, should he not have any living heirs at the time of his death. As a result, Fred decided to incorporate some charitable gifts to his estate plan.

Tragically, shortly after taking these actions both Fred’s daughter and grandson died.

By revisiting his estate plan and updating it to incorporate charitable gifts, upon his death Fred was able to create a lasting legacy consistent with his wishes.

Among other causes, Fred’s estate funded a scholarship in his wife’s name with a local community foundation, helping future generations of students in the community he loved.

The big picture: August is a great time to ask yourself: what do I want my legacy to be?

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