Creating and reviewing your estate plan is a selfless way to protect and provide for your loved ones after you die; it’s not just about protecting your money.
When creating or reviewing your estate plan, review of beneficiary designations for retirement plans and life insurance is often not given the attention that it deserves. People often assume that their will or trust dictates how their retirement accounts and life insurance proceeds are to be distributed upon their death. This is not the case: One must have an up-to-date beneficiary designation in order to do this. This is a relatively easy task that some people inadvertently forget.
In addition to providing the security of having these assets go where one desires, beneficiary designations avoid probate, which is the court supervised process of distributed assets after one’s death. Probate is often costly and time consuming, and adds an additional “hoop” through which loved ones are required to jump.
Besides naming a primary beneficiary, it is recommended that you designate a secondary or “contingent” beneficiary, in case your primary beneficiary fails to survive you. In such a case, if you haven’t named a contingent beneficiary, the proceeds will become subject to probate, and may also be subject to additional taxes.