Friday, August 12, 2011 Don’t Inadvertently Disinherit Your Loved Ones—Review Your Estate Plan Regularly
All of our
readers know just how important—how essential—a
will is to protecting your family after you pass away. Leaving clear and
tangible instructions can prevent family infighting as well as hurt or
unsettled feelings; and leaving a legally airtight will can prevent wasted time
and money in unnecessarily long probate proceedings. But for all of this, there are a few assets
that your will may not be able to address.
This
article in CNN Money describes three assets that could cause you to “unwittingly
disinherit intended beneficiaries, including your children, from significant
portions of your estate,” namely your 401(k) plan, your IRA account, and your
life insurance.
You can name
anybody you’d like as a beneficiary in your will, but when it comes to 401(k)
plans it’s your spouse who is entitled to the money when you die. “If you want
to leave a 401(k) to someone else, your spouse must first file a written
statement waiving rights to it.” Even a prenuptial agreement won’t help if you
want to keep your 401(k) assets out of the communal pot, you’ll have to
convince your spouse to sign a waiver after
you’ve tied the knot. “A person can't give up spousal rights to inherit a 401(k)
until actually married. ‘A prenup by itself is not a valid waiver according to
the rules governing 401(k) plans.’"
Who will
inherit your IRA or your life insurance is a little easier to control than who
will inherit your 401(k). In the case of IRA or life insurance accounts the person
named as the beneficiary on the account will always take precedence over a beneficiary
named in your will. The most common inheritance
issues we see with these accounts is when people forget to update their
beneficiary forms after a significant life change such as a divorce or the
birth of a child. In these cases it’s important to review and update your
beneficiaries every 2-5 years to ensure there’s no confusion between your will
and the designated beneficiary on the account.
Having a
will is important, but a will is simply
one piece of a whole plan—a plan that likely includes many pieces. Being
aware of all the pieces of your estate plan, and keeping those pieces working
together and in harmony, is essential to ensuring that your family and your
legacy is protected. Our office can help. |