Wills, Inheritances and Beneficiaries
By Barry Zimmer on April 7th, 2015 in Inheritance Planning
These days, we’re really paying attention to the long term repercussions of our choices. We’re living in the moment, but very much aware and very much proactive in our efforts of saving for the future. But do we know as much as we should? And how do we know if our decisions are the best ones for our unique needs? Here are a few “across the board” truths about Wills, inheritances and beneficiaries.
Retirement and Your Will
Most people believe the Will is the anchor of an estate plan. It’s important and it does play a role in any estate plan, but these days, there are many other documents that are as important – and perhaps more so in some instances – as the traditional Will. In fact, did you know that your Will has very little, if anything, to do with who receives your retirement fund? Your beneficiary designation form that you signed when you established your retirement account is what determines who receives any proceeds after your death. If there have been changes in your life, such as a divorce or marriage, you’ll want to take a look at any Wills, inheritances and beneficiaries that are in place – including those that are part of your employer’s retirement offering.
The risks of not completing a beneficiary form (and you’d be surprised at how many people put off naming a beneficiary) could mean big taxes for your heirs and of course, if you divorce and don’t remove your former spouse as the beneficiary, it could leave a new spouse holding a lot of debts – and even more resentment. Remember, no matter what your Will says, not changing that beneficiary form means big problems, including tying up those funds for years.
Finally, many clients also wrongly assume that if there’s no beneficiary noted on their 401 (k) or IRA, the Will then kicks in and makes the determination. Nothing could be further from the truth. The institution turns to its contract with you, sometimes referred to as the custodial agreement. This takes precedence in determining the beneficiaries when there there’s nothing noted on the other paperwork. While typically this simply refers to a default beneficiary, depending on each state’s laws, there are times when it passes to the estate versus a surviving loved one.
Maintaining Control with Wills, Inheritances and Beneficiaries
The fact is, there are many things that can set off the proverbial domino effect. The good news is that with a bit of planning and with a detailed approached, the vast majority of estate planning problems involving Wills, inheritances and beneficiaries are easily avoidable.
- Don’t miss an opportunity to name a primary beneficiary as well as a secondary or alternate beneficiary.
- Make a commitment to reviewing all of your estate planning documents once a year and don’t forget the beneficiary forms that are part of your retirement plans.
- There are also life insurance policies that include beneficiary designations. Don’t forget those either as they can quickly create problems.
There’s a lot to a solid estate plan, complete with any number of quagmires, but once your choices for who receives inheritances and beneficiaries are in line, you’ll see it’s easy to maintain – and the peace of mind is priceless If you’d like to discuss your own estate planning efforts, contact our offices today.