By: Barry E. Haimo, Esq.
January 23, 2020
Failing to Remove (or Add) Beneficiaries From Your Estate Plan
If you asked yourself when was the last time you updated your will, what would you say? If you’re part of the majority of people in America, the answer is likely something along the lines of “it’s been a while.”
We understand. Even having a will puts you ahead of the game, so there is a great sense of security that comes with just knowing there’s one “in the vault” so-to-speak.
However, depending on how long it’s been and what in your life has changed since then, you could find that your current wishes will not be met if something happens to you. This is especially true for managing beneficiaries on your various accounts and assets.
Why Updating Your Beneficiaries Is So Important
What could happen when you fail to ensure that your estate beneficiary information is up to date? Three primary things:
- Property and assets will go to the last person(s) listed on your beneficiary forms
- Naming the wrong beneficiary could result in a lack of protection over your estate
- Unexpected errors by plan administrators could go unchecked
Let’s take a closer look…
Your Beneficiary Forms Supersede Any Last Will and Testament
According to Florida probate law, the intestate succession order (the order in which your estate will be distributed) is such that creditors/debts are paid first. Afterward, the remaining assets are then disbursed according to the most recent last will and testament.
Because beneficiary forms are connected to entities that present to probate court as creditors, those named beneficiaries on individual accounts and assets are distributed before those named in your will. This is how beneficiary forms supersede last wills and testaments in court.
So, say you named an ex-partner or a relative who is no longer in your life as a beneficiary to a 401k account from an early employer. And you never rolled those funds over. Count on a blast from the past when it comes time to distribute those funds.
People Change – and Your Named Beneficiaries Might Too
Besides major life events like births and deaths, there are a plethora of other scenarios in which you might want to make updates to your beneficiaries. Or as noted above, you could divorce or split up with a long-term partner – and maybe even decide to get re-hitched.
Alternatively, as time passes, you might find one of your children isn’t quite as responsible as you’d hoped. You may find peace of mind by adding an extra layer of protection (one more beneficiary) before you let your child take over what you have set aside.
Administrator Errors Are More Easily Caught When You’re Watching
Finally, we’re all human. That means, on occasion, an error may creep in somewhere in all that paperwork. The best estate planning teams have systems in place designed to pass through several layers of review to ensure that it doesn’t happen.
That said, not all documents may be executed by your estate planners. And in every case, it is ultimately your responsibility to review all paperwork. When you make it a habit to regularly review and update your beneficiaries (among other estate planning maintenance) you automatically have a better chance of catching the odd error.
Set yourself a reminder – it’s so easy to do, there’s really no good excuse – and plan to spend some time once a year reviewing every aspect of your estate, including beneficiaries.
Make necessary changes, set a new reminder for the following year, and spend another 12 months worry-free. If you have specific questions about how to designate beneficiaries for any piece of your estate, Haimo Law is here to help.
Barry E. Haimo, Esq.
Strategic Planning With Purpose®
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