Updating Your Beneficiary Information
Whether you decide to leave your estate to family, friends, a charitable organization, or even the beloved furry friend that greets you at the door every evening, updating your beneficiary information on a regular basis is a necessary—and often overlooked—detail.
You want the assets you have spent your entire life earning to go to the person, or the people, you choose. Although this may seem obvious, many circumstances could potentially prevent your designated beneficiary from actually receiving your estate.
For example, if your beneficiary passes away before you, and you fail to specify that your bequest is only valid if that beneficiary outlives you, your estate could end up going to the beneficiary’s husband instead. Divorces can also cause complications, especially if custody issues exist. If you have children from different marriages, you may have to indicate in your will that the estate should be left to your own children in order to avoid it being dispersed among your step-children as well.
Per stirpes distribution equally divides the shares of an estate in a manner that gives the greatest benefits to those closest in relation to the deceased. As an example, if a man has two living children and two grandchildren from a third, deceased child, each of the two living children would receive one-third of the estate, while the grandchildren would split the remaining one-third.
Per capita distribution designates that each surviving descendant gets an equal share of the estate, regardless of the generation. In our hypothetical case, each descendant would receive one-fourth of the estate under this distribution method.
Don’t take the job of naming contingent or secondary beneficiaries lightly. A contingent beneficiary only becomes a beneficiary if your primary beneficiary dies. If you have no contingent beneficiary and your primary beneficiary dies, the inheritance is returned to your estate and is subject to unnecessary probate taxes and fees.
Be specific. Although you probably only have one cousin Fred, providing specific beneficiary identification will help reduce any risks and disputes over your estate. Likewise, many institutions, such as colleges or universities, have similar names that should be clarified.
Keep up to date.Review your will at a minimum of every two years in order to ensure that all bequeathals and circumstances are accounted for properly. If you experience a significant family or financial event, update your will immediately.
Get approval first.If you are leaving property that will end up costing the beneficiary money and you are not providing funds for the upkeep, it is important that you let the beneficiary know this beforehand to avoid misunderstandings, a rejection of your bequeathal, and a lengthy estate settlement process.