Beneficiary Designation Reminder

Estate Planning

Beneficiary designation forms are an important way for account and asset owners to ensure the respective assets pass to the individuals of their choosing. Mistakes with beneficiary designations could result in serious loss – the testator’s wishes might not be carried out, surviving family might lose assets, and lengthy and costly probate might result. (Individuals can help avoid probate in North Carolina by keeping both beneficiary designations and payable-on-death (POD) forms up-to-date.)

Recently, the death of a spouse navigating divorce illustrated how critical up-to-date signatures are in one’s estate. The estate conflict took place outside the United States, but the outcome is a lesson to those creating their estates domestically as well. A married couple had moved forward with a divorce, assets were divided, and divorce documents created. Both spouses had established relationships with new partners during this time. The wife signed divorce papers and sent them to the husband. However, he passed away before signing the paperwork. With no will in place, the husband’s entire estate, including death benefits, passed to his estranged wife, leaving his family and new partner with nothing.

If the husband had updated beneficiary designations on accounts and life insurance forms and ensured created a valid, current will, he could have prevented his soon-to-be-ex spouse from receiving assets and instead would have been able to provide for his surviving family and partner.

Blank beneficiary designations could create just as much postmortem conflict among surviving family members as outdated designations. If the husband above had not passed away, had signed divorce paperwork and married his new partner, his ex-wife would still have been entitled to death benefits of his life insurance policy if he had forgotten to update the forms.

Our Chapel Hill estate planning attorneys have documented a few other instances that involved beneficiary designation mistakes. One involved a testator simply writing “see will” on the beneficiary designation form for a retirement account. Although his will clearly outlined exactly how to divide the retirement assets among family members, failing to name an individual or trust made the beneficiary designation invalid. Stories such as these serve as yet another reminder to keep all documents in one’s estate, not just a will, up-to-date and properly complete.

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