An estate plan may consist of numerous documents ranging from wills to powers of attorney. Those documents may name beneficiaries who can receive the testator’s assets, a personal representative to administer their estate and people they trust to care for them in the event of an emergency.
Those who have taken the time to establish an estate plan are already ahead of the curve, as many adults don’t even have a simple will. However, they need to continue thinking about their protection and the support needs of their loved ones. The documents they draft may require occasional revisions and updates. Situations ranging from the death of a beneficiary to remarriage may require changes to existing estate planning paperwork.
Testators may have to remove beneficiaries, add new beneficiaries and update what property they include. They may also need to make adjustments to their advance directives and powers of attorney. While all of those changes are important, there is another, equally important change that many testators overlook when modifying their paperwork.
Life insurance may require consideration
A life insurance policy is often a crucial component of an effective estate plan. It helps surviving family members pay off a mortgage or replace someone’s income. Testators may include certain instructions in their estate planning documents that relate to their life insurance.
Their estate planning paperwork does not dictate what happens with life insurance proceeds. The beneficiary designations that the policyholder filed with the insurance company are what matter when the time comes to make a claim. The policyholder has to file new paperwork with the insurance company to remove a deceased individual or ex-spouse from their documents. Simply updating the instructions in a will is not sufficient.
There may be secondary beneficiary designations that require review as well. Some people file transfer-on-death paperwork with their financial institutions so that their checking accounts or retirement savings can transfer outside of probate court to a specific surviving family member or chosen beneficiary after their passing. Those documents may also require review and modification when making adjustments to an estate plan.
Proactively updating all necessary documents can help people drive optimal protection from an estate plan. Accurate beneficiary designations are crucial to the protection of those left behind after someone passes.