Beneficiary designations are an important aspect of estate planning. When it comes to retirement accounts, life insurance policies and other assets, these designations spell out who should receive funds.
Because it is easy to overlook issues affecting beneficiary designations, you must take certain actions to keep your estate plan on track.
Keep beneficiaries updated
Life changes such as marriage, divorce, births or deaths in the family may necessitate updates to your estate plan, as well as your beneficiary designations. Failing to make the proper updates can result in assets going to unintended recipients, or may even eliminate beneficiaries you wished to include in your estate plan.
Use specific language
When designating beneficiaries, be specific and provide full names rather than using general terms like “spouse” or “children.” Detailed language prevents ambiguity and ensures clarity about who should receive the assets.
Consider contingent beneficiaries
In case your primary beneficiary is unable to inherit the assets, having contingent beneficiaries ensures that distribution of assets occurs according to your wishes.
Review your estate plan regularly
In addition to making changes when necessary, you must also regularly review your beneficiary designations. For instance, you may want to conduct a review of your estate plan every three years or so. Regular reviews ensure that your designations remain up-to-date and in line with your current circumstances.
Beneficiary designations offer key benefits, such as helping you avoid probate. They also ensure a timely transfer of funds from accounts to your loved ones after you are gone. As a result, you must make certain that designations remain accurate to ensure optimal peace of mind for you and your loved ones.