Although many people over look this aspect of estate planning, it is as important as writing a will. You will likely have a number of different accounts that need a beneficiary named; these may include IRA accounts, retirement, bank accounts, and investment accounts.
In most cases with a retirement account you will have to name your spouse as a beneficiary, but with other types of accounts this may not be necessary. If you are not married, you will have to name someone else as beneficiary on your retirement accounts.
When you die, the institution that holds these accounts are bound by contract to pay these benefits to the person that you named as beneficiary. They will go directly to that person, without going through the probate process. This is also true when it comes to life insurance policies.
If you name your child as beneficiary and at the time of your death that child is still a minor, the insurance company or financial instruction may require the court to appoint a guardian so that person can manage the funds.
In a situation where you are divorced, it is very important that you update all of your insurance policies and financial accounts. If something should happen to you before you do this, all of those benefits would be paid to your former spouse, regardless of if you have since remarried.
Anytime that there is a significant change in your life, you will want to review these accounts to ensure that you have named the right person as beneficiary of your accounts. A lot of people forget this step, and the results are usually not good. Even if you don’t have a major life-changing event, you may want to make it a habit to review your accounts and insurance policies on a regular basis so that you do not forget who you have named as beneficiary. Do this at the same time that you do an annual review of your estate plan, which is also very important.
Taking the time to keep all of your policies and accounts up to date will be very beneficial for your loved ones later.