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Beneficiary designations are a key part of your estate plan

On Behalf of | Aug 13, 2021 | estate planning | 0 comments

Many people in California forget the importance of beneficiary designations when they are planning their estate. Beneficiary designations can actually take precedence over other documents in your estate plan, so it is crucial to ensure that they are up-to-date.

Check the beneficiary designations on all of your accounts

You probably listed a beneficiary on all of your financial accounts even if you have forgotten that you did so. Every time you open a checking or savings account, the bank will ask you to list the person who you would like to leave the account to should you pass away. Most people quickly write down the name of their spouse or relative and then forget about it.

When circumstances in your life change, the beneficiaries listed on your financial accounts may need to change as well. For example, if you went through a divorce, got married or had children, you may want to update your beneficiary designations.

Your will does not supersede beneficiary designations

Even if you name your new spouse as the beneficiary of your entire estate in your will, you still need to update your beneficiary designations to reflect that wish. After you pass away, the contents of your financial accounts will go directly to the beneficiaries listed on those accounts regardless of what other estate planning documents say. The probate process will only come into play if there is no beneficiary listed on an account or the beneficiary is deceased.

Name contingent beneficiaries

You have the option to list a primary and a contingent beneficiary on an account. It’s a good idea to list both, just in case the primary beneficiary is no longer around. Make sure to read beneficiary designation forms thoroughly, as they can work differently at each financial institution.

Get advice about naming a trust as the beneficiary

If you are setting up a trust as part of your estate plan, you may consider listing the trust as the beneficiary of your financial accounts. This could have an impact on your taxes, so it’s a good idea to consult an estate planning professional first.