When making decisions about your estate plan, you base those decisions on the information you have at that time, including who you want to be your beneficiaries after your death. But, as things change in our lives, our estate plans need to change, too. Knowing when to change beneficiaries can make estate planning more efficient, and ensure that when the time comes, your loved ones will actually receive what you intended.
Estate planning has a purpose
Estate planning is an important step to take if you want to make sure your loved ones are provided for, in case of your death or disability. Proper estate planning gives you the ability to take charge of your family’s future and spare them the expense and delay of managing your affairs after your death or upon your incapacity. Incapacity planning allows you to plan for your finances, as well as your medical treatment, in the event you are unable to do so yourself. Estate planning may allow your family to avoid the expensive and time-consuming process of probate, a legal process that is open to the public.
What is a Beneficiary?
A beneficiary is an individual or entity entitled to receive property or other assets from an estate, trust, or other type of estate planning tool. Retirement accounts, life insurance policies and transfer-on-death accounts also require the designation of a beneficiary. Beneficiaries can either be “primary beneficiaries,” which are the first in line to receive a specific asset upon your death, or “secondary” or “contingent” beneficiaries, who receive the assets if there are no surviving primary beneficiaries at the time of your death.
Importance of updating beneficiary designations
It is critical that you keep beneficiary designations current, because your named beneficiary on an insurance policy or retirement account, for example, typically supersede any instructions in a will. It is easy to periodically review and revise your beneficiary designations to be sure that your assets will ultimately be distributed as you wish.
Events that signal the need to revise your beneficiaries
There are certain situations that generally mean it is time to review your beneficiary designations. Changes resulting from marriages and divorces often require a change in beneficiaries. For instance, if your parents were named as beneficiaries when you were single, but you are now married, or you get divorced and remarried, those beneficiary designations need to be changed.
You may plan to divide your assets among your children evenly, but one child has since developed special needs. You may need to decide whether that child needs a larger share of assets, and whether an inheritance will make that child ineligible for any benefit programs. The death of a beneficiary always required revisions to your beneficiary designations. If your spouse has died, but you did not name a secondary or contingent beneficiary, you will need to revise your estate plan. The same goes for any other beneficiary that passes away. If you do not change your beneficiary, the probate court will determine who receives that property.
If you have questions regarding beneficiaries, or any other estate planning needs, please contact Wilcox Attorneys, PA online or by calling us at (479) 443-0062.
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