When it comes to estate planning, many people wrongly assume all they need is a last will and testament. In reality, however, estate planning is much more complex and failing to take note of this fact can have serious and unintentional implications.

We’ve previously discussed the importance of beneficiary designations. The fact is that much of an indivdiual’s wealth is typically held in banking and investment accounts or insurance policies. One of the big advantages of setting up these types of accounts is that assets can pass directly to intended beneficiaries without going through the lengthy and costly probate process.

Upon setting up a banking or investment account, an indivdiual is required to name a primary beneficiary. The problem is that once the account is set up, most indivdiuals wrongly believe everything is taken care of. There are, however, several events and situations that may require an indivdiual to update beneficiary designations.

For example, say an indivdiual gets divorced or remarried, if he or she doesn’t take steps to update beneficiary designations, an ex-spouse may benefit financially. Other life events that warrant beneficary updates include the birth of a child or grandchild, the death of a named beneficary and cases in which a beneficary becomes disabled.

Also, due to the often tenuous standings of many modern-day financial institutions, mergers and acquisitions are commonplace. In some cases, however, the beneficary designations on accounts previously held by one financial institution may not transfer upon a sale or merger. It’s wise, therefore to revisit and make revisions to these important documents on a routine basis.

As with many important life and financial decisions, beneficary designations require regular attention and action. Individuals who fail to take such actions may unintentiionally disinherit intended beneficiaries or leave assets to unintended parties.

Source: Forbes, “The Big Estate-Planning Goof You May Be Making,” Harper Willis, Dec. 16, 2013