Many people in California plan to pass on their assets to their loved ones after death, including investment accounts, 401(k) plans, bank accounts, and, of course, life insurance. When people open many of these types of accounts, they are asked to name a beneficiary to receive the account in case the owner passes away. However, when it comes time to think about estate planning, many people forget about these beneficiary designations, even though they are the main mechanism by which some of most people’s largest assets are transferred.
It can be particularly important to make sure that beneficiary designations are up to date and correct. Someone may start a 401(k) at their office job out of university, naming their parents as beneficiaries. Even though they are older, married and have children, they may never have updated that designation. In other cases, people forget to update their designations after a divorce. In case of an unexpected tragedy, these outdated beneficiary designations could lead to family disputes. People often believe that they can control their assets through a will, but this only applies to items that go through probate, not accounts with beneficiary designations.
Beneficiary designations should be reviewed on an ongoing basis to ensure that they are current and reflect the account owner’s vision for estate planning. Keeping all of the documents about each account can help to avoid older accounts slipping through the cracks. In addition, beneficiary designations can be checked during major life events like marriage, divorce or childbirth.
Reviewing these designations can be part of an overall review of each person’s estate plan, especially as laws change with time, as do people’s loved ones and plans for the future. An estate planning attorney may work with clients to keep their documents up to date and accurate.