If you have an estate plan in place already, you are ahead of over half the population in the United States. Taking the time to create that plan, however, is only the first step toward protecting everyone and everything that is important to you. You must also update your plan for it to be successful and work as intended. For example, the Oklahoma City estate planning attorneys at Parman & Easterday explain the importance of updating your beneficiary designations.
The Importance of Updating Your Estate Plan
As you undoubtedly know, your estate plan has the power to protect your hard-earned assets as well as help those assets grow over the course of your lifetime. That same plan, if structured carefully, can also protect your loved ones in the event of your incapacity as well as ensure that your wishes will be honored if you are unable to express them as a result of your own incapacity. While it is certainly crucial to create an initial estate plan that is well thought out and comprehensive in nature, estate planning is not something you ever really finish. No matter how well thought out and thorough that initial plan is, it will still need to be updated at some point down the road.
Where Can You Find Beneficiaries in Your Estate Plan?
Typically, the people you love play an important role in your estate plan. In fact, for many people, their loved ones are the motivation for creating a plan at all. So it should come as no surprise then that beneficiaries are commonly found throughout the average estate plan. For example, you will likely have designated beneficiaries in your:
- Last Will and Testament
- Trust agreement
- 401(k) or IRA
- Life insurance policy
- Financial accounts
- Investment accounts
When Do I Need to Update My Beneficiaries?
To ensure that your estate plan works as intended you should routinely review and revise your plan. Although there is no universally accepted time frame, as experienced estate planning attorneys who have seen the results of not keeping your plan and beneficiary designations up to date, we suggest that you routinely review your estate plan every three years. You need to review your plan more often when you are younger because major life changes are more likely to occur during that time period. When you conduct a routine review of your estate plan, make sure you pay attention to your beneficiary designations to keep them up to date. Whether during a routine review, or outside of a routine review, some of the most common reasons you might realize you need to make changes to your beneficiary designations include:
- Birth of a beneficiary – your existing plan documents should account for future beneficiaries with generic, inclusive language, such as “descendants.” Nevertheless, it is always better to use a beneficiary’s actual name once born to alleviate the possibility of confusion and reduce the likelihood of litigation.
- Death of a beneficiary – once again, your existing plan should contemplate the possibility of a beneficiary predeceasing you by including successor beneficiaries or providing instructions for how the assets should be handled in the event of a beneficiary’s death. Most default beneficiary designations do not benefit the descendants of a designated beneficiary. For example, if you name a child as a beneficiary and that child predeceases you, you could inadvertently omit some of your grandchildren. Nevertheless, if you are aware of the death of a beneficiary it is always best to update your designations to make the successor the primary beneficiary and to name a new successor.
- Marriage – you may have already recognized the need to update your beneficiaries if you get married; however, the marriage of an adult child might also prompt you to add, or remove, a beneficiary, depending on your feelings about your in-law.
- Divorce – if it is your own divorce, you want to update your beneficiaries as soon as possible to ensure that your now ex-spouse doesn’t inherit your assets.
- Beneficiary reaching the age of majority – because a minor child cannot inherit directly from your estate, you may have a trust in place to protect your child’s inheritance. If your child has reached the age of majority, however, it is now possible to add your child in as a beneficiary throughout your estate plan.
- New accounts/policy/document – a surprising number of people simply forget to name beneficiaries on retirement, investment, and financial accounts. This can cause the asset held in the account to be held up in probate instead of going straight to loved ones in the event of your death.
Contact Oklahoma City Estate Planning Lawyers
For additional information, please join us for an upcoming FREE seminar. If you have additional questions about your beneficiary designations, or you wish to update your estate plan, contact the experienced Oklahoma City estate planning attorneys at Parman & Easterday by calling 405-843-6100 to schedule your appointment today.
- Estate Planning for Small Business Owners: Securing Your Legacy - March 1, 2024
- Inheritance Planning Oversights: Addressing the Commonly Missed Details - February 27, 2024
- Revocable Living Trusts: Flexibility in Planning and Beyond - February 20, 2024