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An Estate Planning Priority: Updating Your Beneficiaries

What is a beneficiary? It is either a person or a legal entity that is entitled to receive the proceeds from a bank account, investments, life insurance policy, trust, or estate. A beneficiary can be a friend or family member, or it can be any individual or organization such as a nonprofit organization, a school, a church or a charity.

As Schenectady attorneys who help people establish estate plans, we cannot stress enough the importance of keeping beneficiary designations updated. Why is this? It's because a great deal of people's wealth is tied up in beneficiary designations.

If you named beneficiaries on your bank accounts, life insurance policies, or retirement accounts 5, 10 or 15 years ago, there's a good chance that given the choice, you'd make some changes. Since named beneficiaries usually supersede the instructions in wills, it's very important to keep your beneficiary designations up-to-date.

When to Review Your Beneficiary Designations

By periodically reviewing your beneficiary designations on your retirement accounts, life insurance policies, and other financial accounts, you can be rest assured that if anything were to happen to you, your assets would be divided according to your wishes.

Review your beneficiary designations whenever you experience the following:

  • You get married.
  • You file for divorce.
  • There is a birth in the family.
  • There is a death in the family.
  • You have a falling out with an adult child.
  • You roll over your IRA or 401(k).

On another note, if you fail to have a valid beneficiary designation on file for certain financial accounts, then if you die, your assets can become payable to your estate, causing a significant tax burden and a major inconvenience for the ones you love. In the worst case scenario, your benefits may go to someone other than who you would have intended.

Most importantly, if you ever get divorced or experience significant life changes, be sure to check and revise any outdated documents. If you get divorced and never remove your ex-spouse as a beneficiary, if you die, those assets can go to him or her – probably not what you want!

To learn more about updating beneficiary designations, or for estate planning guidance in Schenectady, contact DeLorenzo, Grasso & Dalmata!