The Importance of Beneficiary Designations and Titling
October 25, 2017, by Shelley Thompson, attorney with Burns Figa & Will, P.C.
It's a common misconception -- you've completed your will and believe that all your assets will pass to those you have named in your will. You might be surprised to find out your will does not govern your retirement accounts, annuities, or life insurance. The beneficiary designation you signed years ago on those accounts governs them -- those companies are required to pay out that money on your death to those beneficiaries by contract, not those you have named in your will.
I have had clients surprised to learn who their named beneficiary is on a retirement account. Sometimes it's a sister, instead of their child. Sometimes it's an ex-spouse. Sometimes it's a child directly, even though the client has created a trust to hold their child's inheritance. I explain that if the child rather than the trust is the named beneficiary on an account for a life insurance policy, then on the parent's death, the child will receive the account at age 18 -- often a bad time in one's life to receive a large gift.
I always tell my clients to request their beneficiary designation change forms as part of their estate plans, and I advise them how to complete the forms so that they are consistent with their wills or trusts. Without this step an estate plan is incomplete.
Similarly, clients often don't realize that titling trumps their will. For example, in Colorado if you have about $70,000 in accounts in your individual name, then your sopuse will need to open a probate to have access to those accounts on your death. Having a will does not change that. This can be a real headache for a surviving spouse. If you have an account jointly titled with someone, it passes automatically to that person on your death. In sum, going over titling and beneficiary designations is an essential part of estate planning.
iWillandTrust.com is the only website where an estate planning attorney will provide advice on your titling and beneficiary designations, so that they correspond with your estate plan. Don't put it off; take 30-40 minutes today to use iWillandTrust.com.