Did you know that outside of your will, there are other pieces of paper you will need to file with certain account managers to verify that you have named a beneficiary? The vast majority of most people’s savings and retirement holdings are located in retirement accounts like IRAs or 401(k)s.
The person who is appointed to inherit the money after your death is known as a beneficiary. This is not a formal exercise. In fact, it is very important for directing the administrator or custodian of the account to formally release the funds to the person of your choosing. This is distinct from anything you have listed out in your will, as the company managing your IRA or 401(k) will defer to the forms filed with them.
It is probably the case that you named a beneficiary when you initially established these accounts. However, any major life event or the turning over of a new year should prompt you to review these beneficiary designations. One of the most common challenges that arises includes failing to update your beneficiary designation forms when you get divorced. Your heirs will face a significant battle if you pass away with an ex-spouse still on the paperwork, as that party is legally entitled to receive it.
Another common challenge to be aware of is the need for successor beneficiaries. If one of your beneficiaries passes away, you need to name another person to receive these assets. For more help, schedule a consultation with an estate planning lawyer who can help guide you through this process and verify that your beneficiary designation forms help accomplish what you want in your estate plan.
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