Is It Time to Review Your Beneficiaries in Your Estate Plan?
Securing the financial well-being of your loved ones in the face of unforeseen circumstances is a pivotal motive behind establishing a comprehensive estate plan. A critical component of achieving this objective involves consistently updating the designated beneficiaries throughout your estate plan. Neglecting to keep beneficiary information current can jeopardize the success of your estate planning endeavors. In this context, the Indianapolis attorneys at Frank & Kraft encourage you to review your beneficiaries throughout your estate plan.
Locating Beneficiaries in Your Estate Plan
Even the most straightforward estate plans encompass beneficiary designations within a Last Will and Testament. As the complexity of your estate plan increases, beneficiaries may be identified in various locations, including trust agreements, 401(k) or IRAs, life insurance policies, financial accounts, and investment accounts.
Understanding the Role of Beneficiaries
Despite the frequent interchangeability of the terms “beneficiary” and “heir,” they hold distinct meanings. An heir inherits assets from your estate according to state intestate succession laws and may include your spouse, children, and blood relatives. Conversely, a beneficiary is an entity, person, or even a family pet designated by you to inherit from your estate. While a beneficiary may also be a legal heir, the terms are not synonymous.
Types of Beneficiaries
A beneficiary can assume different roles, such as a successor or contingent beneficiary, as well as a future beneficiary. A successor or contingent beneficiary is next in line to receive assets if the primary beneficiary predeceases you, rejects the inheritance, or cannot be located after a diligent search. Future beneficiaries, specified in a trust agreement, are entitled to benefit from trust assets after a designated time frame or a set number of distributions to the current beneficiary.
When to Review Your Beneficiaries
Regular reviews of your estate plan, ideally every five years, ensure that your plan aligns with your current needs and goals. Immediate updates to beneficiary designations may be necessary under specific circumstances, including the passing of a beneficiary, the birth of a new beneficiary, a beneficiary reaching adulthood, the acquisition of new accounts, policies, or documents, and changes in marital status such as marriage or divorce.
Proactively addressing these scenarios safeguards the accuracy and effectiveness of your estate plan, contributing to the financial well-being of your loved ones. Periodic reviews serve as a proactive measure, ensuring that your estate plan remains a dynamic and responsive document. This practice aligns your plan with any changes in personal circumstances, financial status, or applicable laws.
Consideration should also be given to the potential impact of evolving family dynamics, such as the birth of new family members or changes in relationships. Updating beneficiary designations promptly in response to such life events helps prevent complications and ensures that your intentions are accurately reflected in the distribution of your assets.
The meticulous attention to updating beneficiary designations and conducting routine reviews of your estate plan is paramount to make sure that your plan remains a reliable and comprehensive tool for securing the financial future of your loved ones. This proactive approach not only safeguards the integrity of your intentions but also enhances the likelihood of achieving the financial security you envision for your loved ones. By staying vigilant and responsive to life changes, you contribute to the enduring success of your estate plan.
Do You Need to Review and Update Your Estate Plan Beneficiaries?
For more information, please join us for an upcoming FREE seminar. If you need to sit down and review and revise the beneficiaries in your estate plan, contact the experienced Indianapolis estate planning attorneys at Frank & Kraft by calling (317) 684-1100 to schedule an appointment.
Paul Kraft is Co-Founder and the senior Principal of Frank & Kraft, one of the leading law firms in Indiana in the area of estate planning as well as business and tax planning.
Mr. Kraft assists clients primarily in the areas of estate planning and administration, Medicaid planning, federal and state taxation, real estate and corporate law, bringing the added perspective of an accounting background to his work.
Latest posts by Paul A. Kraft, Estate Planning Attorney (see all)
