Your will might not be the most important document in your estate plan after all. If you have beneficiary designations filled out for your investments and insurance policies, you can skip probating those assets and save a lot of time, money, and headaches for your family. Retirement accounts, such as IRAs and 401k plans, can be passed on to the beneficiaries that you select with a simple form. There is no need for lawyers, probate, or court. And, a beneficiary designation is binding and supersedes other forms of identifying heirs such as through your will.
Skipping Probate Altogether. Many important assets in a person’s portfolio often pass at the time of death by beneficiary designation and not by that person’s will or trust agreement. Common examples of these types of assets include life insurance, retirement plans, individual retirement accounts (IRAs), and annuities. For most people, these types of assets represent a significant portion of their total overall assets, yet the beneficiary designations for these assets are sometimes not carefully considered or properly filled out.
Conflicts With Your Will. A beneficiary designation document has the final say with your financial institutions as to who receives the assets when you die. Your will or trust does not control or take precedence over the beneficiary designation. For example, a parent’s last will may direct that investments be held in a trust for minor children if both parents are deceased but life insurance proceeds will skip the trust entirely proper designation names the children directly.
No Beneficiaries. If you should die without naming a beneficiary, your assets will be distributed through normal probate court at a great expense and time to your loved ones. The only person who wins in probate court are probate lawyers who continually whittle the estate down with fees especially if the will is contested. The probate system and laws are also set up to make the process take a long time, over six months or more, while creditors are given notice.
So Simple. It is so simple to add a beneficiary onto your mutual fund or other investment account. Many mutual fund companies have links right on your account page for the paperwork. And, in many cases, you have to fill out only a one page document. It is so simple but yet so powerful. All the information that is usually required is a name, social security number, and date of birth. There is no need for lawyers, notaries, or witnesses in almost all cases.
Are you 100% sure that you named a beneficiary for all of your IRAs, mutual funds, and insurance policies? It would definitely be worth thirty minutes of your life to check with your investment companies. It is an easy, usually one page piece of paper to fix a potentially costly mistake. Now is the time, while you’re alive, to update your beneficiaries.