There are many times in life when someone may need to review their estate plan and make certain changes. Maybe they got divorced and need to remove their spouse from their paperwork. Perhaps they just had children and need to add guardian information to their will and make their child a beneficiary of their estate. Changes to families and financial circumstances often make estate planning updates necessary.
People generally remember to review the paperwork they created with a lawyer, such as wills, trusts, powers of attorney and advanced healthcare directives, when reviewing and updating their estate planning documents. However, they may forget about crucial outside paperwork that is not integrated into their actual estate plan that could have a major bearing on what happens when they die.
Life insurance policies
For many testators, a life insurance policy will be a major part of their estate plan. It would provide the resources to support their children and spouse if anything were to happen to them. Sometimes people talk about their life insurance in their wills or other estate planning documents, which may make them think that they can update their beneficiary information for their life insurance policy directly through their estate planning paperwork.
However, it will be the beneficiary designations filed with the insurance company that determine who receives proceeds from the policy. If there is a conflict between someone’s will and their life insurance paperwork, the paperwork filed with the company takes precedence.
People frequently add transfer-on-death destinations to their biggest financial accounts to avoid probate complications. By submitting paperwork to the financial institution before they die, they can allow their loved ones to take possession of their investment account or checking account without the funds first passing through probate court.
The actual paperwork registered with the financial institution will need to reflect any changes to someone’s beneficiary designations. If people forget to update transfer-on-death designations, the wrong person might end up inheriting their most valuable accounts.
People need to take care not to leave behind conflicting instructions because they have only revised some of their estate-related paperwork. Knowing which documents require review when estate planning updates become pressing business can help people to better retain control over their interests and their legacy.