Why should I review beneficiary designations?

| Apr 2, 2020 | Estate Planning |

An important part of estate planning is naming heirs who will receive an inheritance from you. While you can use a will to name your heirs to your estate, you might want to avoid probate if possible. By filing out a beneficiary designation on your pensions, like your 401(k)s and IRAs, you can transfer assets to heirs outside of probate. However, you may need to change your beneficiary designations at some point. 

The problem with leaving your beneficiary designations alone is that life often causes great upheavals, like a divorce or a death in the family. Sometimes you might experience happy developments like the birth of a grandchild. According to Forbes, there are a number of reasons why you should revisit and change your beneficiary designations if you find it necessary. 

Life changes 

People often name a wife or a husband as a beneficiary. However, if you should divorce, you might not want your former spouse to receive money from your pension or insurance policy. Even if you marry a new spouse, your ex might still receive whatever is in your pension if you do not change the beneficiary designation. 

Also, you might add new members to your family, like children, grandchildren, and possibly stepchildren if you remarry. You do not want your new heirs to lose out, so reviewing your designations and adding your new family members can help ensure that they receive an inheritance from you. You might also want to change a designation if a beneficiary dies. 

Successor beneficiaries 

In addition to changing beneficiaries, you could also designate successor beneficiaries in the event something should happen to one of your intended heirs. Not all assets may include a successor or backup beneficiary provision, but many do. This can help you keep control over where your assets go in the event you cannot revisit your pensions or insurance policies. 

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