In my practice, I prepare a significant number of wills & estates. Most people understand that the gifts that they make in a will or trust will pass to the person they desire upon the testator’s death. However, it isn’t always so clear when it comes to life insurance policies, Annuities, IRAs and 401(k)s.
Regardless of what your will says, upon your death, the administrators of the above funds will distribute the proceeds in accordance with the beneficiary designation you previously made. Unfortunately, many people do not realize that life insurance policies, 401(k)s and the like will pass by operation of law rather than according to the will.
Therefore, it is important to meet with an experienced estate planning attorney to craft your will and review your beneficiary designations. For example, if you began working with a company prior to becoming married, it is likely that your spouse was not the beneficiary you chose for your retirement fund. Perhaps you chose a parent or sibling instead. Maybe you now have children and you would like them to share an annuity that you purchased. These designations must be updated periodically as circumstances dictate.
Fortunately, changing a beneficiary is a fairly simple process. An attorney can help you complete the necessary paperwork and submit it to the plan administrator. For the above reasons, it is important to occasionally revisit your beneficiary designations. Even if you carefully craft a will, if you do have not selected the proper beneficiary for your insurance policy, annuity, IRA or 401(k), your heirs may be in for a surprise when it comes to distributing your assets.