Keeping beneficiary designations current is vital
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Keeping beneficiary designations current is vital

| Dec 14, 2020 | Estate Planning

Many people in Kentucky find comfort in knowing their estate planning is in place. Their wills, powers of attorney and wishes related to end-of-life considerations are up to date. It’s also important to keep designated beneficiaries current on workplace retirement plans, life insurance, IRAs, bank accounts and mutual funds. Similarly, modifications of beneficiaries might need updating on annuities, brokerage accounts, IRS section 125 plans, Health Savings Accounts and 529 college savings plans.

In most circumstances, assets will go to the beneficiaries regardless of what their wills say. The following life events might justify reviews of beneficiary designations:

  • Divorce and/or remarriage: There is no automatic right for spouses to be listed as each other’s life insurance beneficiary.
  • Death of a primary beneficiary: If secondary beneficiaries are named, assets will go to them if the primary beneficiary predeceases the estate owner.
  • Changed employment: If 401(k) values were rolled over to the 401(k) plan of the new employer or an IRA, beneficiaries must be named on the new plans, even if they are the same as on the previous accounts.
  • Birth of a new child or grandchild: Establishing a new trust can be done at the same time as updating beneficiaries.
  • Change of ownership of a financial institution: When this happens, check that beneficiaries designated before the change are still in effect.
  • A beneficiary becomes disabled: In such an event, the testator might want to create a special needs trust, with the trust named as a beneficiary, ensuring that Social Security disability benefits are not affected by inheritance.

People in Kentucky are advised to review all beneficiaries and estate planning documents once every few years, even if none of the above events occurred.