The importance of being earnest (when designating beneficiaries)

No one likes to make a will and people constantly put it off, but one thing that should never be put off is designating beneficiaries.  Not only should beneficiaries be named carefully, they should also periodically be reviewed, verified and possibly updated.

Many financial institutions require that you name a beneficiary, so the institution you work with can pass on your property to the appropriately designated recipient.  If things in your life haven’t changed over time, your original beneficiary will probably be retained; however, life changes, such as births, deaths, adoptions, and divorces, may require you to assign a different or additional beneficiary.

If a divorce has occurred and a QDRO has been prepared to divide a 401K or 403B, it is imperative that the beneficiary designation be changed once the QDRO has been accepted by the plan.  Without this change, it is possible that a former spouse, not entitled to a portion of the decease’s retained retirement plan could remain the beneficiary and receive not only their designated portion but also the portion retained by the former spouse.  This can and has led to lengthy and expensive litigation.

Changing circumstances often cause beneficiary pay outs to go to people with substance abuse problems or other issues.  It is important to periodically update beneficiaries, especially during the estate planning process, to make sure they match the will, and also that the designated beneficiary is still the person that you want to inherit your property.

The full article can be seen here.