As people come in to begin their estate planning, one of the issues we take a look at is whether they have beneficiary designations in place for any of their insurance, IRA’s or other assets.
What we often find is that these beneficiary designations were made years ago and have not been updated to reflect current choices.
For Life Insurance – pull out those policies and look to see who you named as the beneficiary. Is it your ex-spouse? Your parents (prior to marriage)? Your parents (even though you now have adult children)?
People often forget this important issue when they have life changing events. Often after the death of a spouse, the survivor will update many things, but forget to change the beneficiaries on life insurance and IRA’s. Sometimes when a beneficiary dies, we are too overcome with grief initially to address this legal issue; then life moves forward and we forget.
Unintended consequences can result if we forget to address this issue. Life insurance is a contract and it passes outside of your Will or Trust. It is not controlled by the provisions of those estate planning documents.
If you pass away and your ex-spouse is on your life insurance, he or she will get a remarkable bonus that was unexpected and unintended.
If you pass away and your parents are still named as beneficiaries, they get the money, even if your spouse and children need the money. If your parents have passed away, the insurance company may insist on making the check payable to your parent’s estate. In that case, an estate will have to be opened in Probate Court simply to process this check, years after they have passed away.
Don’t permit unfortunate consequences to occur – check your beneficiary designations today – make certain that the right people will receive the amounts you intended.