Life insurance and 401ks are some of the best means of making sure that your spouse and other loved ones are provided for in the event that you pass away. They’re also something you need to keep on top of as you go through major life changes.
Chances are, you carefully selected your beneficiaries when you first bought life insurance or opened a retirement account. Most likely they were the most important people in your life at the time. If you were young and single, they were probably your parents.
Flash forward to the present day. Are these beneficiaries still the most important people in your life? Are they all still alive? Have you gotten married, had children, gotten divorced? Major life changes happen all the time, and often the last thing on your mind is changing your beneficiary designations to account for them.
Why Beneficiary Designations Matter
Changing your beneficiary designations can involve tedious paperwork, and nobody enjoys that. It might be tempting to put off the task, promising yourself that you’ll get around to it later. But procrastination can lead to serious problems.
There’s no way of knowing when something might happen that will put your life or well-being in jeopardy. In the unfortunate event that something does happen and you haven’t changed your designations, the consequences could be dire. Your hard-earned assets will pass to whomever you have currently designated as your beneficiary, and that person may no longer be someone you want to inherit your estate. Worse yet, the people you most care about could be left out in the cold if you never changed your papers to reflect your intentions to provide for them.
Major life events like marriages, divorces, and the birth of children are obvious times to review your beneficiary designations. However, these aren’t the only times you should be reviewing them. You’d be amazed at how many people continue to list deceased relatives as beneficiaries on their most important financial instruments long after those individuals have passed away.
Beneficiary designations are legally binding documents, and you need to treat them with the seriousness that that entails. Beneficiary designations supersede any gifts you’ve made in your will if the will’s provisions are contradictory. If your beneficiary designations are no longer valid, for example if the named beneficiary is deceased, the benefits at issue will pass according to applicable state or federal law. Unfortunately, the law doesn’t always align with what you might want.
Therefore, you should develop a plan for routinely reviewing your designations, and all your estate planning documents, for that matter, on a regular basis. Make a list of each account you have that contains beneficiary designations, who those beneficiaries are, and the date you made the designations. Plan to review the beneficiary designations at least once a year. An experienced estate planning attorney can help you develop the best plan for ensuring that your designations are updated to reflect the needs of your specific circumstances.
Contact a California Estate Planning Attorney Today
The Ledbetter Law Firm, APC is dedicated to helping individuals and families plan for their futures through all aspects of estate planning. Contact The Ledbetter Law Firm, APC to discuss a plan for ensuring that your beneficiary designations in your life insurance and retirement accounts remain up-to-date.