Don’t assume that your heirs will get an asset just because you leave it to them in your will. In some cases, other types of paperwork actually take precedence over your will.
A good example is a beneficiary designation. You may find yourself using this with life insurance policies, annuities and retirement accounts. The beneficiary designation is something you set up at the beginning to determine where the controlling company should send the money.
If it’s a life insurance policy, for instance, the insurance company needs to know who to cut a check to if you pass away, and they do not want to gamble on your own estate planning abilities. They make you pick when you buy the policy.
One key part of estate planning, then, is to make sure these designations never become outdated. The company will still follow them, even if your will says something very different.
Perhaps you had one child, a daughter, when you bought the policy. You named her as the beneficiary. Five years later, you had a son. You never changed the policy, but you wrote in your will that half of the money should go to each child. If you die, all of the money still goes to your daughter because that is the instruction that the insurance company has. It’s then up to your daughter if she wants to split the money with your son or not.
Issues like this, as you can imagine, lead to a lot of family struggles after the fact. Make sure you know what steps you can take to avoid that outcome.
