Every asset you own should be planned for accordingly in your estate plan. If you’re not familiar with this process or want the insight of someone familiar with your options, finding an area estate planning lawyer is crucial.
If you don’t properly designate your beneficiaries for your retirement accounts, these may end up going through probate. Probate is the legal court process that validates someone’s will and provides for the distribution of assets. Probate is not always necessary for every estate plan but may kick in when someone has a substantial value in their estate. This can be an expensive, drawn out and even frustrating process for your heirs.
You can protect your retirement accounts by designating beneficiaries properly. Retirement accounts include beneficiary designation forms that allow you to name a primary beneficiary as well as a contingent beneficiary. You may need to update these beneficiaries over time, such as if you get married, get divorced, or have additional beneficiaries you’d like to include.
Naming a contingent beneficiary is extremely important because if something happens to your primary beneficiary, you want to ensure that there is a smooth and seamless transfer of these assets to your designated beneficiary party. It is common to forget about updating beneficiary information, but it should be done once a year and after any major changes in your life. The financial institutions where your retirement accounts are held have to hand over assets to named beneficiaries upon the death of the owner.
The contract between the retirement account company and the owner of the account concludes upon death, so long as the person has filed their information correctly with beneficiary designations. This allows for your beneficiary to receive these assets relatively quickly.