Have You Updated Your Beneficiary Designations?
Making sure your beneficiary designations are up to date is a crucial part of estate planning. I recently needed to update mine due to divorce, but it also gave me a chance to revisit who was the beneficiary of what assets, and put that in line with my overall estate plan. It also changed not just due to divorce, but the fact that my mother is slowly getting older and I have young nephews still under the age of majority. Check and make sure yours don’t name family member(s) who have passed away. Also have a secondary beneficiary if appropriate, and don’t name an ex-spouse after divorce.
When you go through a divorce, a Final Divorce Order will automatically revoke any will with a gift benefiting your former spouse. But federal law prevents your divorce from revoking any beneficiary designations, and those remain until you change them. That means your life insurance, 401K, TSP, or other accounts could still go to benefit your former spouse if you haven’t updated them.
In the D.C. area, our largest assets tend to be our real estate and retirement accounts, IRAs and other retirements, especially Thrift Savings Plans and Federal Employees Retirement System plans. If you own your real estate by joint ownership with right of survivorship and your beneficiary designations are up to date, the other estate items are often a checking account, personal property and automobile. A top tip I have is you can actually put a beneficiary designation on your vehicle with the Virginia Dept of Motor Vehicles!
For many financial accounts, you can have a joint account where someone has full access to all the funds, or a payable on death beneficiary. Depending on your circumstances, one or the other might make more sense.
There are often ways to avoid a drawn-out probate or any probate if you have a small estate, or where all items pass through a beneficiary designation or operation of law. If your estate, not including the items that pass by these designations, is under $25,000 (generally there are some different rules, best to talk to an attorney for specifics and what makes the most sense for your situation), then there is a very limited amount of probate to be done. Those with more complicated estates (for privacy), or with more complicated family situations may want a trust. Though if your beneficiary designations and joint ownership are set up correctly, you might not need a trust to accomplish those goals. This will make things easier for your family.
I was recently contacted by a client whose husband had just passed. She was the beneficiary on every financial account: retirement plan, insurance policy, and the car and home were in her name with joint survivorship. We discussed how little she needed to actually do. She said that it was an amazing gift to her to be able to just grieve without having to jump through all these hoops. Planning for someone else is truly a gift, and it’s also a gift to you as you get older, so it’s easier to care for you.
So while this is fresh in your mind, think about all your financial accounts, life insurance, and retirement. Double check to make sure you have beneficiaries, that they are the appropriate ones for your current life circumstances, and set up transfers on death if you can. Talk to an attorney about estate planning, basic documents and how to use your ability to set beneficiaries to your family’s advantage.
If you would like more information, please feel free to reach out to Family First Law.
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