Most investment and financial accounts allow the account holders to name beneficiaries to receive funds in the account upon the account holder’s death. To many of us, the forms that ask us to name beneficiaries may seem boilerplate, simple to complete, and not a big deal in the grand scheme of things. It may take just a few moments to write a few names on the beneficiary designation forms. The repercussions can be long-lasting, though. Yes, your beneficiary designations really are that important.
Maybe you’ve taken the important step of creating a comprehensive estate plan. You need to understand, though, that your beneficiary designations actually trump the provisions of your Will.
Let’s say that Marco writes his Will so his estate is divided equally between his wife and three sons. Although he has some real estate, personal property, and business interests, the bulk of his wealth is tied up in financial accounts and insurance policies. Because he named his wife the only beneficiary on every account or policy he owns, she received everything in those accounts and the proceeds from all his insurance policies after his death. Very little of his money became part of his probate estate. His sons were each left with a smaller inheritance than Marco intended.
Major life events trigger a review of your estate plans. In addition, your estate plans should be reviewed periodically just to make sure everything works the way you want.
The same principle holds true with your beneficiary designations.
Our mythical testator, Marco, wrote a Will splitting his estate evenly between his wife and spouse. He made specific bequests of property, investments, financial accounts, and personal possessions. Between the signing of the Will and his death, however, he sold some of the property and failed to change the beneficiary designations on his financial accounts.
His personal representative was bound by the terms of the Will. Financial institutions and insurance companies were bound by the beneficiary designations.
Property that Marco no longer owned, of course, never became part of his probate estate. Because he failed to update his Will and his beneficiary designations, his heirs did not receive the inheritance he wanted them to have.
With our busy lives, it can be easy to forget to update your beneficiary designations. However, their importance cannot be overlooked.
As a Florida attorney board certified in Wills, Trusts & Estates, Attorney John Mangan offers effective estate planning to his clients. To schedule an appointment, call us at 772-324-9050 or fill out our Contact Form. Our office is conveniently located in Palm City, Florida.