Most people in New Jersey help their children and grandchildren as much as they can. Fortunately, wills and other estate planning documents enable people to pass their wealth on to their descendants. However, some people neglect to update some of the most critical documents: beneficiary designation forms.
Updating beneficiary designation forms may be more important than some people think. Beneficiary designations on assets such as life insurance plans, employee benefits, and 529 accounts override divorce agreements and wills. For this reason, some financial experts recommend that people review their beneficiary designations once a year. Also, people may want to consider adding their adult children as secondary beneficiaries in the event that their spouse dies before they do.
Even though most people choose a beneficiary when they open their accounts, situations often change. For instance, if a married man open an IRA and listed his wife as the beneficiary, the wife would get all of the assets, even if the couple divorced; in this instance, the man’s children from a previous marriage would receive nothing, even if the man had requested in his will that all of his financial assets go to the children. Also, beneficiary designations outweigh divorce agreements, which means that some ex-spouses could receive benefits that weren’t intended for them.
Because the federal government does not impose estate taxes on people who have assets less than $5.25 million, some people may assume that they don’t need to keep their estate planning documents up-to-date. However, it is important for everyone to avoid costly estate planning errors. People who need help with estate protection may want to work with an attorney.
Source: MarketWatch, “Don’t make this common estate-planning error,” Bill Bischoff, Sep. 17, 2013