Picture this -- a frantic call to the family lawyer by a recent widow weâ€™ll call Fran. Fran had just learned that her deceased husband Edâ€™s life insurance proceeds were going to be paid to his ex-wife Sally. As Edâ€™s current wife, shouldnâ€™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. Doesnâ€™t this change the policy designation as well?
As this woman discovered from her lawyer, beneficiary designations can be â€œthe trump card of estate planning.â€ The ex-wife Sally will get the life insurance proceeds. It doesnâ€™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 â€œMoney Matters: The trump card of estate planning,â€sets out a handful of good pointers to remember.
As weâ€™ve just read, assigning and frequently reviewing your beneficiary designations is a critical part of estate planning. Those assets whose beneficiary designations â€œtrumpâ€ any wills or estate directives include the following:
- Individual and group life insurance
- Traditional and Roth IRAâ€™s
- Qualified retirement plans, such as 401kâ€™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 doesnâ€™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.
For more information on this and other elder law and estate planning subjects, contact Idaho Estate Planning and schedule a consultation. Remember, good planning is no accident.