When you buy an insurance policy, open a bank account or set up a retirement account, you are required to designate a beneficiary. In some cases, you may be asked to choose a secondary beneficiary, but that is often not mandatory. As your life changes, you preference regarding who benefits from these accounts may also change. If you have not taken a look at these account for some time, now is an excellent time to review them.
In the field of estate planning, it is common to hear about situations where a decedent’s wishes are clearly violated because of an oversight. Many of these stories revolve around outdated beneficiary designations. Estranged former spouses, distant relatives and virtual strangers end up getting money that should have gone to loving family or friends. These stories are sad, and so easily avoided.
Perhaps the most common situation involves exes benefiting from funds that should have gone to children. If you have children from one marriage, but chose a spouse from another marriage who is no longer in the picture when you created an account, there will be no one to intervene in the interests of justice. Your designation is all that matters. Even if the evidence that you did not want your former spouse to get a dime is overwhelming, courts can, and likely will defer to your beneficiary designation.
Even if your divorce agreement clearly states that a retirement fund or pension will not go to your divorcing spouse, the court will look to the designated beneficiary. The only way to ensure that the money goes where you want it to is to take the proper steps to name a new beneficiary.
The best way to ensure that your estate plan is in order is to schedule an annual review. You can likely check all your designated beneficiaries online, but it is sometimes beneficial to review your will, trusts, and other plans with your attorney on a regular basis. You can make checking your designated beneficiaries part of the process.