Picture this -- a frantic call to the family lawyer by a recent widow we’ll call Fran. Fran had just learned that her deceased husband Ed’s life insurance proceeds were going to be paid to his ex-wife Sally. As Ed’s current wife, shouldn’t she, not Sally, be entitled to the life insurance proceeds? Ed had changed his will prior to death making Fran the beneficiary of his entire estate. Doesn’t this change the policy designation as well?
As this woman discovered from her lawyer, beneficiary designations can be “the trump card of estate planning.” The ex-wife Sally will get the life insurance proceeds. It doesn’t matter what the will says in these circumstances. With certain financial instruments the beneficiary designations have authority to control the asset disposition regardless of other provisions. A recent WMUR article, titled “Money Matters: The trump card of estate planning,” sets out a handful of good pointers to remember.
As we’ve just read, assigning and frequently reviewing your beneficiary designations is a critical part of estate planning. Those assets whose beneficiary designations “trump” any wills or estate directives include the following:
- Individual and group life insurance
- Traditional and Roth IRA’s
- Qualified retirement plans, such as 401k’s
- ESOPs (Employee Stock Option Plans)
- Contractual rights under deferred compensation plans
- Employment contracts
Remember that making a change in your will or your trust doesn’t automatically make changes to all of your assets listed in those documents. Talk with an estate planning lawyer to cover all of the bases. You want to make sure that your beneficiary designations are updated and in sync with your overall estate planning strategy and its documents.
Here are a couple of other thoughts: always name primary and contingent beneficiaries, and when you make any changes to these documents, get a confirmation from the receiving institution that the changes were actually made and reflect your wishes.
Finally, retain copies of your beneficiary documentation, as it might be some time before these materials are needed. You want to make sure that the paperwork can be found easily.
Again, it’s wise to speak to an experienced estate planning attorney, such as myself, with your questions regarding beneficiary designations and to get sound advice on your estate planning.
Please call me anytime (305-443-3104) to set up an appointment to help get your beneficiary paperwork organized for ALL your accounts. I can help!
I'm both an exceptionally experienced Florida Bar Board Certified Estate Planning Attorney and a Florida Bar Board Certified Elder Law Attorney, as well. Did I mention that I am also a Florida Certified Public Accountant (CPA) and a Certified Financial Planner™ Professional? Of course, if you would like more information about General Estate Planning in South Florida, I have a very informative website!
Reference: WMUR (May 21, 2015) “Money Matters: The trump card of estate planning”