Most of our Idaho clients hire us to draft three basic estate planning documents: (1) a will or trust; (2) a power of attorney for health care; and (3) a power of attorney for financial affairs. Walking out of our office with those three documents does not necessarily mean your estate plan is complete. There are several additional tasks our clients likely need to perform after they leave our office. The two most common tasks include updating beneficiary designations on retirement accounts and life insurance contracts.
As a general rule, individuals with retirement accounts (whether employer sponsored or not) must list beneficiaries to their accounts. Most individuals list their spouses as the primary beneficiary of their accounts and, if available as an option, list their children as contingent beneficiaries in equal shares. Most of our clients have not reviewed their beneficiary designations for several years – or even decades – and rarely think of doing the same. Unfortunately we see cases in which clients forget to update their beneficiary designations so their retirement accounts end up being distributed contrary to our clients’ intentions. It is important to understand who you have designated as beneficiaries of your respective retirement accounts.
Life insurance contracts fall into the same category as retirement accounts. Individuals often receive life insurance from their employers and fail to update their beneficiary designations upon the happening of a life event (i.e., death, divorce, marriage, or the birth of a child). Life insurance proceeds, like retirement accounts, will be distributed to the individuals listed as beneficiaries – not according to the terms of an individual’s will or testamentary instrument.
It is important to understand that an individuals’ will does not control the distribution of an individual’s retirement accounts or life insurance proceeds. We often receive questions from children as to how a parent’s retirement account will be divided. Often the question is phrased as something like, “my father’s will divides everything equally between his three children, does this mean his retirement accounts will also be divided equally even though he only designated one child as a beneficiary to his retirement account?” In most circumstances, the answer is “No.” Retirement accounts and life insurance proceeds will be distributed to the persons named as beneficiaries to such accounts.
This website includes general information about legal issues and developments in the law. Such materials are for informational purposes only and may not reflect the most current legal developments. These informational materials are not intended, and must not be taken, as legal advice on any particular set of facts or circumstances. You need to contact a lawyer for advice on specific legal issues.