Estate planners in Michigan often make the mistake of thinking that their wills are the final word on how their assets should be distributed. However, this is simply not true. Anyone who has assets such as life insurance policies, investment accounts and college savings plans typically designate beneficiaries on these documents. Failure to review these documents periodically and make changes as needed could result in these assets going into probate instead of the beneficiaries named in the will.
There are a variety of reasons why beneficiary designations may need to be updated. Common reasons include divorce or remarriage, the birth of children or grandchildren or the death of the primary beneficiary. However, beneficiary designations should also be reviewed if retirement accounts are rolled over due to a new job or the financial institution managing the assets changes ownership. In addition, if the primary beneficiary becomes disabled, it may be a better option to establish a special needs trust for that individual. The trust then becomes the beneficiary.
Individuals may benefit from reviewing their beneficiary designations annually, regardless of whether or not there were any major life changes. If there is no secondary beneficiary, this might be a good time to designate one in order to further protect these assets. While any time of year is a good time to review beneficiary information, February may be the most ideal time since financial institutions are sending out their tax forms.
Estate planning can often be a complex process. However, avoiding common mistakes, such as not updating beneficiary designations, can ensure that assets are distributed as intended. Michigan residents who need assistance with their estate plan may find it beneficial to speak to someone who is familiar with our state's probate laws.
Source: MarketWatch, Don't make the No. 1 estate-planning goof, Harper Willis, Jan. 23, 2014