A comprehensive estate plan begins with a will and directives. But it would be incomplete without considering beneficiary designations. This enables every aspect of the plan to work together toward providing for your loved ones. A review of how all assets are titled and current beneficiary designations will ensure your goals are achieved.
It is important to review beneficiary designations on life insurance policies. Because insurance proceeds can be considerable, it is critical to ensure that the correct person is designated as the beneficiary and such designation complies with all necessary requirements. In many cases you may designate more than one beneficiary or a trust may be the beneficiary. This will allow you to provide for you partner and your children or other loved ones.
In order for a retirement plan participant’s partner to be the recipient of benefits upon death, the partner must be designated on the appropriate beneficiary designation form. If not, the default beneficiary will likely be the spouse or other biological relation of the participant, as defined under federal law which generally does not recognize same sex marriage. The participant should contact their human resources department and request a summary plan description for their retirement plan. This should indicate who the default beneficiary is. Beneficiary designation forms can be requested from a company’s human resources department or on their benefit plan administrator’s website.
If the retirement plan participant has been married to an opposite sex individual and a divorce is not yet final, regardless of who is designated on the beneficiary designation form, the prior spouse would be entitled to the retirement plan benefits, unless he or she gives her consent to the designation of a different beneficiary.
All financial accounts can pass by beneficiary designation. It is important to check with your bank and financial planner to ensure your beneficiary designations are up to date and on file. If no beneficiary is named then the accounts will pay to the estate. If there is only one beneficiary this is a minor inconvenience. If certain accounts are intended to provide for a partner or other family member, a lost or incomplete beneficiary designation can defeat the entire plan.
Beneficiary designations are a key piece in the estate planning puzzle. Individuals should contact an attorney to make sure they comply with all requirements so their wishes will be achieved.
Law Offices of Debbie J. Cunningham
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