If you live in Alabama and you are creating an estate plan, one thing you must be careful about is keeping your beneficiary designations up to date. This can be difficult because a number of different assets are passed by beneficiary, including life insurance payments, retirement accounts and IRAs. It can be easy to lose track of various retirement accounts, especially if you have had several employers and a different plan with each of them.
The importance of beneficiary designations
Some people may not realize how powerful beneficiary designations are within the overall estate plan. They override whatever you have put in a will or a trust, so if there are issues with your beneficiary designations, they need to be fixed on the forms themselves.
There are a few guidelines you can follow to help stay on top of your beneficiary designations. It’s important to fill them out correctly in the first place, reading the instructions since there is not a single standard format and each one may be different. Naming both a primary beneficiary and a contingency or backup beneficiary helps you make sure that the asset will go to someone you want to have it if your primary beneficiary dies. Watch out for a common mistake in which you name a different child or other relative on each beneficiary designation. This might seem like a fair approach at the time, but if the assets grow at different rates, you could end up leaving very different amounts to each heir.
Above all, it is important to review the beneficiary designations regularly, such as yearly, as well as after major life events in the family, including marriages, divorces, births and deaths. With these reviews, you can make sure that your choices are consistent with your current family situation. You also need to look over them when you make changes to your will or any trusts. As easy as they can be to forget about, beneficiary designations are an important part of your estate plan and should always be dealt with as part of the larger whole.