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Coordinating the beneficiary for your investments with your will

Good estate planning is typically more complex than just signing a will. Although a will can effectively designate how you would like your assets divided, it may not be enough. If you have bank accounts, retirement savings or investment accounts, they can drastically change how your assets are distributed.

In New Jersey, the beneficiary information that is listed with your financial products usually overrides the information in your will. Although that has advantages - the finances go directly to their intended recipients, and it can help avoid a long and expensive journey through probate court - there are also downfalls.

Because the beneficiary information usually overrides the will, it is important to make sure your estate planning documents take all of your saving and investment accounts into consideration. When beneficiary forms and estate planning documents are not carefully coordinated, you can inadvertently disinherit a loved one.

Many experts recommend reviewing your beneficiary designations regularly. In addition, when you work with an attorney to create an estate plan, it is important to inform him or her about finances and beneficiaries who have already been named. Any time you experience a major life transition - such as marriage, divorce, or the birth or death of a loved one - it is critical to make sure your estate planning and beneficiary documents are still accurate.

Different accounts have different options regarding how assets are transferred to your beneficiaries. Some accounts are made payable on death (POD); with other accounts you can Transfer on Death (TOD). There are advantages and disadvantages to either option, as well as other options, so it is typically best to ask an experienced professional what is most appropriate for you.

Learn more about beneficiary designations in upcoming posts.

Source: The Wall Street Journal, "Beware the Beneficiary Form," Carolyn T. Geer, 6 July 2011

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