Importance Of Updating Beneficiary Designations
There are certain assets that may be transferred outside of the process of probate that involve the use of beneficiary designations. Beneficiary designations are typically chosen upon opening a bank account, retirement account, or life insurance policy but can sometimes be forgotten. After your passing, the account's assets will be transferred directly to the beneficiary you chose.
Beneficiary designations are not distributed according to the terms of a person's Will. Instead, the assets are transferred directly to the beneficiaries, and they are not included in the probate process, provided that a beneficiary has been identified. Avoiding probate can be enticing, but because these designations supersede a Will, they require careful consideration.
Considerations Before Designating a Beneficiary
Choosing a beneficiary should be done with care and deliberation. It would be best if you considered the following to avoid and eliminate possible unanticipated repercussions and disasters in the future.
The recipient should be financially savvy and able to manage potentially vast amounts of money.
You should have a plan in place if the designated beneficiary becomes incapacitated or dies before you.
If the named beneficiary is a minor, depending on the amount of money the minor could inherit, it may be required for the minor to have a conservatorship or someone responsible to hold the asset in trust for the minor.
You should name successor beneficiaries to avoid the asset being distributed to your probate estate.
The Importance of Updating Beneficiary Designation Regularly
Pursuant to GA Code 1981, §33-15-61, the owner of a benefit contract has the right to change the beneficiary or beneficiaries at any time. However, few people checked and updated them.
It is remarkable how many people have past spouses or deceased relatives still listed as beneficiaries on retirement accounts or life insurance policies from years ago. Without updating these beneficiary designations, your assets might be transferred to individuals against your wishes or put your loved ones in a challenging financial situation. There are certain life events that trigger the review of beneficiary designations, those events include:
Making a major purchase like a home
The birth of a child
Death of the sole beneficiary
Updating estate planning documents.
It is equally vital to review and amend beneficiary designations as it is to name an acceptable beneficiary. After significant life events such as marriage, adoption, births, divorce, or the death of a loved one, the designations should be updated. By reviewing and revising these designations based on your current condition, your preferences will be carried out as you intended.
These are some of the most overlooked estate planning documents. As such, this article should encourage you to review your beneficiary designations as soon as possible. Contact Thompson Mungo Firm today to schedule a meeting where we can help put your mind at ease about beneficiary designations and other estate planning matters.