Estate planning is important for everyone, but it’s especially important for those with loved ones who may be dependent on them. One of the most important estate planning documents is a beneficiary designation.
What is a beneficiary designation?
A beneficiary designation is an estate planning document that names the person or persons who receive your assets after you die. The assets can be anything from cash and investments to life insurance policies and retirement accounts. When you die, the assets get distributed to your beneficiaries according to the terms of the beneficiary designation.
How do you create a beneficiary designation?
The process for creating a beneficiary designation varies depending on the type of asset you’re dealing with. For example, most retirement accounts have a designated beneficiary form that you can fill out and submit to the account administrator. Life insurance policies typically have a section on the application where you can name your beneficiaries.
It’s important to keep your beneficiary designations up to date. If you get married, have children, or get divorced, you’ll need to update your beneficiary designations to reflect these changes. You should also review your beneficiary designations periodically to make sure they’re still in line with your estate planning goals. Ideally, you should update your beneficiary designations whenever there are changes in your law or financial situation. This includes getting married, having children, getting divorced, and so on.
What happens if you don’t have a beneficiary designation?
If you die without a beneficiary designation, your assets may be distributed according to the laws of intestate succession. This means that your assets may go to your closest relatives, as determined by the state in which you live. In most cases, this will be your spouse and children. However, if you don’t have a spouse or children, your assets may go to your parents, siblings or other relatives.
In the end, it’s up to you to decide who you want to receive your assets after you die. Take your time to thoughtfully consider your beneficiaries and update your estate planning documents accordingly. Your loved ones will thank you for it.