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The big oversight many people make when updating estate plans

On Behalf of | Sep 8, 2023 | Estate Planning |

Some people make it a practice to routinely review their estate planning paperwork every few years. Others experience a major life event that they recognize will make their paperwork outdated and possibly invalid and update it accordingly. Regardless of the reason behind an update to their documents, testators need to ensure that their revised documents comply with state law.

Most people know that they need to remove deceased family members or an ex-spouse from their will and trust paperwork. They remember to remove assets that they have liquidated from their paperwork and add newly-acquired property. What they may forget is that some of their most valuable assets may require special paperwork because their will doesn’t control what happens with those resources.

People must update beneficiary designations

Perhaps the most valuable resource for those adjusting to life after the death of a family member is their life insurance coverage. The payout from life insurance can replace lost wages, pay off end-of-life care expenses and cover funeral costs. Many people carry six or seven-figure policies that provide very useful financial support to their loved ones after their passing.

A will cannot determine the beneficiary for a life insurance policy. The beneficiary designation paperwork filed with the insurance provider is what ultimately determines the recipient of those benefits. Those with sizable life insurance policies who lose a family member, divorce or get married may need to file new paperwork with their insurance provider to change the beneficiary chosen to receive the insurance payout after their death. A similar rule applies to transfer-on-death designations attached to financial accounts. The paperwork filed with the financial institution will require an update if someone wants to change the beneficiary who will receive the balance of the account after their death.

Those who frequently review their estate plans will be in a better position to ensure that their documents are valid and will hold up in probate court. Seeking legal guidance when necessary can be helpful in this regard as well.