The Elder and Disability Law Firm, APC Aug. 21, 2017

An often-overlooked consideration in estate planning is reviewing beneficiary designations on a frequent basis. Common instruments that require a beneficiary designation include:

  • Life insurance policies

  • Bank accounts

  • Brokerage firm accounts

  • Retirement accounts

  • Pension plans

After major life events, such as a divorce or death of a family member, beneficiary designations should be revisited and reevaluated. Even if you do not experience a major life event, it is critical to evaluate the designations to make sure your designations track with your estate plan overall. 

In this MarketWatch article, some "horror stories" are outlined. These cautionary tales demonstrate how beneficiary designations can make a huge difference in a decedent's allocation of assets. Here are some important considerations when evaluating your beneficiary designations.

  • List a secondary beneficiary. A decedent listed his wife as the sole beneficiary to his company pension plan, but his wife died before he did. According to the plan's terms, the money went to the decedent's siblings and not his step-sons. This result was due to the order of priority outlined in the plan. The step-sons sued unsuccessfully.

  • Change your beneficiary designations after you get divorced.  Two months after a divorce was final, the decedent died without having changed his life insurance or pension benefit beneficiary designations from his ex-wife to his children. You guessed it - his ex-wife got it all.

The moral of the story is to be mindful of your beneficiary designations. Your estate planning attorney should be aware of the potential risks of not addressing you designations along with your estate plan overall.

Make sure you take the steps necessary to insure your assets go where you want them to after you are gone. Also, keep in mind, in many community property states, including California, if you are married you usually need a spouse's consent to change beneficiary designations.

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