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Beneficiary Designations Trump A Will
When people think of “estate planning” they often associate it with writing a will. Having a will is an integral part of a good estate plan, but there are other important documents to also consider. Often overlooked is the beneficiary designation form for life insurance policies and retirement plans. Reviewing these documents regularly and keeping the information consistent with your overall plan is just as important as revising your will when there is a change in your life or family. This is especially true if the majority of your investments are in a retirement plan (such as a 401(k), IRA or pension), or you intend to leave an inheritance with life insurance.
Life insurance proceeds are distributed according to the beneficiaries you listed when you purchased the policy. Retirement plan funds are distributed according to the beneficiaries you listed when you enrolled or opened the account. Your will does not control these distributions. If your life insurance policies and retirement plans began many years ago, the beneficiaries you named at the time may not reflect your current wishes or could be inconsistent with your will or trust. If most of your assets are held in retirement plans, or if you own a life insurance policy, the majority of your estate might not be distributed to people and organizations you care about the most.
The next time you review your will, verify the beneficiaries named on each of your life insurance policies and retirement plans. To change a beneficiary, request a change of beneficiary form from your plan administrator or life insurance agent. These forms are sometimes available online. Prior to submitting the completed form, review the information with your attorney, especially if you plan to make any changes. Make it a practice to review your life insurance policies and retirement plans as part of your overall estate plan. Do it each time you revise your will or trust.
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This information was compiled by staff in Good Shepherd's Development Department with the assistance of R. Nicholas Nanovic, Esq. of Norris, McLaughlin & Marcus, P.A. It is not intended as tax, legal, financial, or other professional advice.