I am noticing an alarming trend: the beneficiary designations on some of my clients’ life insurance and retirement accounts are not being updated after there has been a “life change.” What I mean is that when the original beneficiary passes away, the surviving person is not updating the beneficiary designation to reflect that change. So, when the survivor passes away, the payout has no where to go. If there was some planning, the Will would direct the payout (though, as we all know, Wills have to be probated!). However, if there was no other planning, the payout would be directed by the state’s intestacy laws.
In either case, with or without other planning documents, that asset is going through the probate process. And, depending on the size of the policy or retirement account, it could very well be a full fledged probate – with all the associated cost, delay and publicity.
Such situation could have and should have been avoided by merely updating that beneficiary designation!
If you have a trust with MH, then you should have your trust be the beneficiary of your life insurance policies. As for your retirement accounts, if you have a spouse, then your spouse should be primary and your trust should be secondary (or contingent). If you are single, then you should have your trust be the primary beneficiary.
Take the time to look over your beneficiary designations and make sure these designations are correct. You do not want your loved ones to have to go through the troubles (and cost) to do it later!
Contributed by MH Phoenix and Arrowhead Estate Planning Attorney James P. Plitz
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This blog should be used for informational purposes only. It does not create an attorney-client relationship with any reader and should not be construed as legal advice. If you need legal advice, please contact an attorney in your community who can assess the specifics of your situation.