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Do Not Underestimate the Power of Beneficiary Designations, And The Importance of Keeping Them Updated

ElderCPlan

As estate planning attorneys who regularly help clients with wills and probate here in Florida, we regularly discuss the importance of not only having a will in place, but a complete estate plan, which also includes beneficiary designations linked to important accounts such as your 401(k), IRAs, life insurance, annuities, etc. These forms are filled out – usually when the accounts are initiated – to determine who receives the asset if the account owner dies. However, many people do not realize that if these designations are overlooked, or if they become outdated or mistakes are made on them, a number of things can go wrong; not only when it comes to your overall estate planning goals, but in terms of large assets potentially being left to unintended beneficiaries.

Your will will never govern accounts like these that have beneficiary designations, which pass outside of probate. As a result, it is best if these designations are revisited on their own anytime your will is reviewed and updated.

Orphaned Accounts That Name People from The Past

One of the biggest mistakes we see happen when it comes to 401(k) accounts is seeing previous accounts with prior employers become “orphaned,” whereby they stay with the old employer and fail to get updated. For example, some clients may have three different 401(k) accounts with previous employers going back decades and name an ex-spouse as the primary beneficiary. This can result in significant assets being left to unintended beneficiaries.

Failing to Update to Address Unanticipated Events

People often do not anticipate that some named beneficiaries may predecease them, particularly if a parent or other relative was named as the beneficiary for an account. However, even if an account names one’s children, tragedies can occur, whereby, for example, a child predeceases a parent, but if the form is not updated and still names all of the children as equal beneficiaries without indicating per capita or per stirpes election, the children of the deceased child will receive nothing, while the two living children split the account proceeds equally, sometimes leading to litigation and family turmoil, in some cases.

Best Practices, To Protect Yourself & Your Loved Ones

In order to protect yourself, your loved ones, and your intentions for your estate plan, try to make sure that you do the following, at a minimum:

  • Review your estate plans, including your beneficiary designations, at least every three to five years
  • Keep all copies of any and all relevant communications involving your beneficiary designations, including correspondence, online updates, updates done via mail, etc.

Contact Our Florida Estate Planning Attorneys to Find Out More

If you would like to speak with one of our Sarasota wills & probate attorneys about your estate plan, contact Moran, Sanchy & Associates today to find out more about our services and how we can help.

Resource:

kiplinger.com/article/retirement/T021-C032-S014-estate-planning-minefield-beneficiary-designations.html

https://www.moransanchylaw.com/the-coronavirus-crisis-estate-planning-are-you-prepared/

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