Choosing Retirement Account Beneficiaries Requires Some Thought
While the execution of wills requires formalities like witnesses and a notary, the reality is that much property passes to heirs through other means that often lack the protections of a properly drafted will or trust.
Things to ConsiderMany bank and investments accounts, as well as real estate, have joint owners who take ownership automatically at the death of the primary owner. Other banks and investment companies offer payable on death accounts that permit owners to name the person or people who will receive them when the owners die. Life insurance, of course, permits the owner to name beneficiaries.
Review the DetailsAll of these types of ownership and beneficiary designations permit these accounts and types of property to avoid probate, meaning that they will not be governed by the terms of a will. When taking advantage of these simplified procedures, owners need to be sure that the decisions they make are consistent with their overall estate planning. It*s not unusual for a will to direct that an estate be equally divided among the decedent*s children, but to find that because of joint accounts or beneficiary designations the estate is distributed unequally, or even to non-family members, such as new boyfriends and girlfriends.
t*s also important to review beneficiary designations every few years to make sure that they are still correct. An out-of-date designation may leave property to an ex-spouse, to ex-girlfriends or -boyfriends, and to people who died before the owner. All of these can thoroughly undermine an estate plan and leave a legacy of resentment that most people would prefer to avoid. Also, sometimes financial institutions have default rules on distribution that may be counterintuitive.