As you create and execute an estate plan, it is crucial to ensure that your beneficiaries are updated and reflect your current wishes. Failure to update your beneficiaries may lead to your assets going to the wrong person, and your intended heirs or beneficiaries may not receive what you planned. Updating your beneficiaries regularly ensures that your loved ones are taken care of, and your assets are passed on in the manner that you wish.
Why Updating Beneficiaries is Important for Estate Planning
When you create an estate plan, you typically designate beneficiaries for your assets. Beneficiaries can include anyone from your immediate family members to a charity organization. However, it is common for individuals to forget to update their beneficiaries, especially if there has been a change in their circumstances, such as a birth, divorce, or death. Failing to update your beneficiaries may cause your assets to be distributed according to outdated wishes, leading to confusion and possible probate court for your loved ones.
That’s right, if you don't update your beneficiaries, your assets may be subject to probate court. Probate is a legal process that ensures your assets are distributed according to your will, or if there is no will, according to state law. Probate can be a lengthy, costly, and public process, but updating your beneficiaries can help to avoid it. With the right beneficiary designations, your assets can bypass probate entirely, saving time, money, and hassle.
For instance, let's say you have a life insurance policy that you purchased many years ago and
designated your parents as the beneficiary. After a few years, you got married and had a child. If you were to pass away, your life insurance policy would be paid out to your parents, if they are still alive, regardless of your current wishes. This could leave your current spouse, children, or other intended beneficiaries without the financial support you intended for them. By updating your beneficiaries after a significant life event such as a loss of a loved one, marriage or divorce, you can ensure that your assets go to the people you want them to.
How to Update Beneficiaries for Estate Planning
Updating beneficiaries can be a simple process, but it is crucial to ensure that you do it correctly. Here are some steps to take when updating beneficiaries for your estate plan:
Review your beneficiary designations: Go through your bank and investment accounts and check the beneficiary designations for each account/asset. Make sure that they reflect your current wishes and that the beneficiaries are the correct people or organizations.
Update your beneficiary designations: If you need to update your beneficiaries, make the necessary changes as soon as possible. You can typically update your beneficiary designations by completing a form provided by your financial institution or other assets' administrators.
Keep a record of your beneficiary designations: Keep a copy of all your beneficiary designations in a secure location, reflecting the updates or changes. Make sure that your loved ones and any other necessary parties know where to find them in case something happens to you.
Updating your beneficiaries is a crucial part of estate planning, and it is essential to ensure that your beneficiaries reflect your current wishes. Failing to update your beneficiaries can lead to costly and time-consuming probate proceedings, causing your intended beneficiaries to miss out on what you intended for them and your assets falling into the wrong hands. Taking the time to review and update your beneficiary designations can help to ensure that your loved ones are taken care of, and your assets are passed on securely.
About the Author
Leslie has been practicing law since 2009 and is the host of the estate planning podcast 'Legacy Purse'. She has a long history of representing family members struggling to inherit property and/or wealth from deceased family members through the Probate Courts. Knowing how time-consuming and expensive the probate process is, Leslie takes great pride in helping her clients learn how to plan and protect their families during their lives so they can avoid the probate court process and save their loved ones that additional grief (and expense).