Take Care of Your Heirs
Nov 07 2009
A perennial estate planning horror story is the one in which a man dies before revising his will leaving everything to his ex-wife instead of to his current spouse as he intended. While none of us would allow this to happen, we could have other potential horror stories lurking in our retirement plans.
Beneficiary designations should be reviewed annually and updated whenever there is a significant “life event” such as birth, death or divorce. That single document is more powerful than you might think because it can override the instructions in your will or trust. Your plan administrator is responsible for maintaining these instructions but paperwork can get lost and what counts is the physical document itself not the electronic entry on a computer screen. That is why you should keep an updated copy with the other important papers your executor will need.
Who you name as beneficiary is another important consideration. Naming your estate or trust as beneficiary may not be the best choice since it can force heirs to take taxable distributions they might otherwise defer. Naming a contingent beneficiary can be another important estate planning tool. These issues are best discussed with your attorney.
While updating legal documents may be inconvenient it isn’t a whole lot of work. More importantly, it is one more way to take care of your heirs.
