Hopefully, you understand how important it is to have a comprehensive estate plan in place as well as what that plan can do for you when it is working properly. Taking the time to create a well-thought-out estate plan, however, is only the first step toward protecting everyone and everything that matter to you. You must also keep that plan up to date for it to work as intended. For example, the Bowie estate planning attorneys at Sinclair Prosser Gasior remind you to check if all your beneficiary designations are up to date.
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.
Beneficiaries in Your Estate Plan
For many people, one of the primary motivations for creating an estate plan is to ensure that estate assets are distributed pursuant to their wishes after they are gone. If that describes one of your motivating factors, you likely have several different areas within your estate plan where beneficiaries can be found. Beneficiaries are commonly found in:
- Last Will and Testament
- Trust agreement
- 401(k) or IRA
- Life insurance policy
- Financial accounts
- Investment accounts
When Should You Update Beneficiaries?
Your entire estate plan should be reviewed and revised, if necessary, on a routine basis throughout your life. Although there is no universally accepted time frame, most estate planning attorneys suggest that you routinely review your estate plan every three to five years until around age 50 and then every five to ten years thereafter. Most of your major life changes will occur before you turn 50 which is why you need to review your plan more often when you are younger. 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 – many estate planning documents will account for future beneficiaries with generic, inclusive language. Nevertheless, it is always better to use a beneficiary’s actual name once born to alleviate the possibility of confusion.
- Death of a beneficiary – by the same token, a well drafted plan will include successor beneficiaries in the event a beneficiary dies, or otherwise cannot accept a gift; however, 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 – your own marriage may prompt you to add If an adult child gets married, however, you might add, or remove, a beneficiary, depending on how you feel about your new son or daughter-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 entire estate.
- 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 Bowie Estate Planning Attorneys
For more information, please join us for an upcoming FREE Webinar. If you have additional questions or concerns about your beneficiary designations, contact the experienced Bowie estate planning attorneys at Sinclair Prosser Gasior by calling (410) 573-4818 to schedule an appointment.