Like many people, you might not particularly enjoy thinking about your estate plans, but such planning is necessary to make sure your assets go where you want them to go. And it’s just as important to regularly review your plans with your tax, legal and financial professionals in case any changes are needed. For instance, some of your wishes expressed in your will may be overridden by beneficiary designations you filled out years ago. If these designations become outdated, your assets could be passed to those you didn’t intend.
You might be surprised at how many of your financial assets and legal documents have beneficiary designations tied to them. If you have an IRA, a 401(k) or other employer-sponsored retirement plan, a life insurance policy, an annuity, a transfer-on-death (TOD) arrangement, or any of a variety of other assets or accounts, you almost certainly named a beneficiary. And this beneficiary designation offers a simple, direct and efficient way to get assets in the hands of your loved ones who survive you.
However, as time goes by, you may experience many changes in your life — and when your life changes, your beneficiary designations may need to follow. But if you are like many people, you might forget to update these designations after a marriage, divorce or other change in your family situation. And because the beneficiary designation is a legally binding document, the asset will go to the person you once named as a beneficiary, regardless of your current relationship status.
It really doesn’t take much effort to look over your accounts and legal arrangements to ensure that your beneficiary designations are current — and if they aren’t, it’s pretty easy to change them. In fact, for some financial accounts, you may be able to update the beneficiary designations online. In any case, plan on reviewing your beneficiary designations regularly, but especially when you experience a change in your life.
Here’s one more thing to keep in mind: Make sure your current beneficiaries are informed that they will eventually be receiving your 401(k), IRA, life insurance proceeds or other assets that require a beneficiary designation. This advance knowledge may help your loved ones as they plan and maintain their own financial and investment strategies.
Although it’s clearly important for you to update your beneficiary designations and to communicate your actions, you will still need to attend to other areas of your estate planning, such as providing care for minor children or dependents, deciding who you want to receive specific items that do not carry a beneficiary designation, naming someone to manage your affairs should you become incapacitated, and specifying the control you wish your beneficiaries to have over their inheritance. These are just a few examples of estate-planning considerations.
Because everyone’s situation is different, you will need to consult with your legal advisor to determine the level of estate planning you require. As we’ve seen, updating your beneficiary is one piece of the puzzle — but to leave the legacy you desire, you’ve got to complete the picture.
• This article was written by Edward Jones for use by Ahwatukee Foothills Edward Jones Financial Advisor Joseph B. Ortiz, AAMS, CRPS. Reach him at (480) 753-7664 or firstname.lastname@example.org. Accredited Asset Management Specialist and AAMS, Chartered Retirement Plans Specialist and CRPS are registered service marks of the College for Financial Planning.