Think that a will or a trust is enough to keep your family out of probate court after you pass? If you neglect to update your beneficiary designations, they may still have to go through the stressful process.
Wills, trusts, and joint ownership are three essential estate planning tools that you can use to pass your assets to family and friends after you die. Many people do not realize, however, that some assets—for instance, retirement accounts and insurance—are not always covered by trusts, wills, or joint ownership.
Instead, these assets transfer through what is known as a beneficiary designation. If yours are not updated and accurate, you could leave your loved ones with a mess in probate court.
Here are a few facts you should know.
How Do Beneficiary Designations Fit into Estate Planning?
For assets like life insurance policies and retirement accounts, you can designate a primary and secondary beneficiary to receive those assets upon your death. For example, many married people who have children choose to name their spouse as the primary beneficiary and their children as secondary beneficiaries. It is important to name both because if the original primary recipient dies, the secondary beneficiaries then inherit the asset without going to probate.
Many people also use beneficiary designations as what is known as a will substitute. For instance, if you leave your retirement account to one person but later change your mind, you can simply change the beneficiary designation on the retirement account without having to update the will. The designation overrides the will.
Why You Should Keep Them Updated
It is a simple fact of life that things change. Relationships change. People pass away or grow distant. Spouses get divorced. Children grow up, get married, and have children. When situations and relationships change, you need to make sure that your beneficiary designations are up to date to reflect the people who you want to receive your assets.
If you don’t, they will have to fight to claim what is theirs in probate court, which is often a stressful, frustrating process.
One particularly example might include an ex-spouse receiving a retirement account. If you divorce your spouse and do not change the beneficiary on your accounts, they could still inherit what you don’t want them to inherit.
Your Beneficiaries Will Thank You for Avoiding Probate
This month, we celebrate Thanksgiving as a country. Want to spread some gratitude? Your beneficiaries will be thankful to you if you keep your designations updated so they don’t have to go through the probate process. Need to discuss your estate plan with an attorney who not only knows what your situation requires, but also genuinely cares? Get in touch with the attorneys at Casal & Moreno today to set up a free consultation.
Waiting another moment is not an option if you want to ensure that your assets go to the people you choose.