Things like life insurance policies, retirement funds, and savings accounts are all included in the assets you have in your name. Accordingly, you must make decisions on how the proceeds of these accounts are to be distributed among your heirs upon your death. Beneficiary designations are key in this regard, as explained by The Balance.
The logic behind beneficiary designations is pretty simple. When opening an account or buying a life insurance policy, you also designate beneficiaries. You can choose primary and secondary beneficiaries, who are next in line in the event the primary heir dies before you do. You can also choose multiple beneficiaries and decide what percentage each receives from your assets. Beneficiaries can be your loved ones, such as spouses and kids, they can be friends, or even they can be trusts.
Beneficiary designations are good because they allow you to bypass probate. Once you have a name filled in, that person automatically receives the assets upon your death. This can also be a drawback in some cases. If you fill out a beneficiary designation but create a will at a later date that lists a different person as heir, the court will honor what was originally filled in. These documents override all other estate planning tools, so make sure you keep your documents up-to-date.
To ensure your estate plan is sound, review it in full at least once a year and make updates as necessary. You should also evaluate all parts of your estate plan after any major life changes. This includes a new child or adoption, a new marriage, a divorce, a major change in your finances, a change in the life of one of your heirs, and many other events. If you’re unsure whether your current estate plan is protecting your best interests, speak with an attorney.