Most people aren’t aware that their wills don’t have the final say concerning assets held in retirement accounts — 401(k) plans and individual retirement accounts (IRAs). The beneficiary provisions of these accounts supersede those of wills.
Your will is, with few exceptions, the most important element to your estate plan. However, that doesn’t mean it’s the last say in all matters. Keep your will updated, but also be sure to keep track of all of your accounts and your beneficiary designation forms — or else your estate might swiftly break apart and into the wrong hands.
This is one of those topics we have to repeat every so often so that each beneficiary designation you sign (or don’t) will stick with you as the important document that it is. A new echo came in the voice of Yahoo News in a recent article titled “How Your Ex-Spouse Could Inherit Most of Your Money.”
Beneficiary designations are convenient little legally-binding documents that allow you to simply list who should receive the account if you’re not around to do so. The trouble is that this “legally-binding aspect” also allows beneficiary designations to run parallel to the will, and often over and above it. In fact, naming someone as beneficiary on the account-provided form can even undo anything you say in the will about who should receive what. So, say you name a spouse as a beneficiary to your IRA, and then you divorce but fail to change the designation. That spouse will still get the IRA even if you intend for everything to go to the kids, a new spouse, your sibling or any other party. Your Ex is named on that legally-binding designation, so it’s theirs.
Keeping these kinds of beneficiary forms all together and updated is often among the more important aspect of your estate planning, but not necessarily the only important element. Proper planning is about mindfulness with regard to all of these little asset details and proper organization of them.
Reference: Yahoo News (May 23, 2014) “How Your Ex-Spouse Could Inherit Most of Your Money”