What You Need to Know About Naming & Updating Beneficiaries

When it comes to estate planning and wills, there’s few things more important than identifying and updating your beneficiaries so your assets get where you want them to go. Read on to learn what you need to know about naming and updating your beneficiaries so you’ll know what to do when beginning your estate planning journey.

Clearly describe each individual beneficiary and institution with specific and identifying details.

Most people know when you’re making your will it’s important to describe your assets in detail, whether they’re physical, liquid, financial, or otherwise. What people don’t often realize is that you must also describe your beneficiaries in-depth. And, by in-depth we mean it’s best practice to provide their full legal name, birth date, social security number, and address or city and state of residence.

Confirm your named beneficiaries are the same in contracts as they are in your will.

Did you know that a contracted agreement trumps your will? Unfortunately for many people who have made the mistake of thinking their will is the final say in beneficiaries, it’s true.

When the court reviews cases where a named beneficiary for a legal contract – whether it’s a divorce decree, a life insurance policy, or otherwise – and a will are different, the information in the contract outweighs the information in the will, regardless of which document is more recent.

To be sure you don’t make a mistake, you must double check that your current wishes and beneficiary assignments are reflected in the associated legal documents and contracts, not just your will.

If beneficiaries on any contracts you have are outdated, be sure to update them right away.

For example, if you have a life insurance policy you bought before your children or grandchildren were born, and you want them to inherit a portion of the funds from it, you need to contact the company that holds your policy and request to update your beneficiaries. Most times it’s a straightforward process and they can send you a form that lets you update beneficiary information quickly and easily.

The key is you need to request the necessary forms. It’s a rare case that a company will prompt you to update beneficiary information, that’s entirely up to you.

When you plan on naming minor children as beneficiaries, consider setting up a trust.

If you plan to leave financial assets to minors, it’s important to remember that they can’t legally conduct business on their own. Which basically means, any time they (or their guardian) need to spend or transfer a portion of their assets, even if it’s simply to provide basic care for them, the court will oversee and decide the outcome of each transaction. The estate will then be billed not only for any approved expenses, but also for the court’s role in distributing and overseeing the funds.

Additionally, when the court has control of a minor’s assets, they will release control to the minor when the child reaches the legal age of adulthood. Though what’s considered an adult varies from state to state, it’s usually between 18 and 21 years old.

By creating a trust for your children you can protect their inheritance from unnecessary and costly court fees, name a fiduciary you trust to oversee their accounts, and assign an age for inheritance that you feel is appropriate, even if it’s beyond the legal age of adulthood.