Don't forget to update your beneficiaries

 Posted on March 31, 2020 in Estate Planning / Probate

When it's time to update your will and your estate plan, take a moment to update your beneficiary designations, as well. This is something that people often forget, and it can prove very costly.

For instance, your life insurance company asked you to pick a beneficiary when you bought the policy. You probably picked a child or your spouse. That's what most people do.

Say that you chose your spouse, wanting to support them even if you passed away. However, you and your spouse have since gotten a divorce. You updated your estate plan to leave items to your children and cut out your ex. However, if you don't update that beneficiary designation, the life insurance payment could still go to your ex — and not your kids.

One potential issue here is that your beneficiary designations carry precedence over your will. People sometimes write in the will that they want to move the life insurance money to someone else, but they'd don't contact the insurance company to change their paperwork. The insurance company only cares about what they have on file. If it is in conflict with your will, they're going to ignore your will and follow the directions that you gave them specifically.

The money may still get to your kids eventually. If your ex gets it and then passes away, he or she could leave it to them. However, there is no legal obligation to do so. You lose control of that money.

To maintain your control and make sure your estate gets distributed to the right people, you need to carefully consider all of the steps you need to take.