Beneficiary forms can override your will

Beneficiary forms can override your will
If you assume your will is your final word on what happens to your assets when you die, they may end up going to an ex-spouse or caught up in a lengthy court battle. This issue is becoming more pronounced as Americans juggle multiple retirement, insurance, and bank accounts.
When you sign up for a 401(k) plan at work, you will be asked to name beneficiaries. These are the people that will inherit your account if you pass away. Usually you will name a primary beneficiary who is your first choice to receive the assets, but you also may name contingent beneficiaries who are essentially backup if the primary beneficiary dies before you do. You should take this very seriously or else the 401(k) will end up in probate court which can be expensive and slow. Even if you do have a will, naming 401(k) beneficiaries makes the inheritance process much quicker and less expensive.
You could write volumes about nightmare beneficiary situations. A spouse for less than a year can end up with the entire retirement plan instead of the participant’s underage child. People will put former friends from decades ago on beneficiary forms and forget about both the forms and the friends.
Plans often have a hierarchy that omits partners, friends, and other relatives in favor of spouses, children, parents, and siblings.
There are documents that can override wills including beneficiary forms for retirement accounts, life insurance, and some bank and brokerage accounts.
401K
Married spouses are automatically entitled to the 401k money of their spouse unless they formally waive it. This waiver must be notarized.
IRA
Most IRAs allow you to name someone other than your spouse as your beneficiary without getting a waiver from your spouse. However, if you live in a community-property state like California or Texas, you will need a waiver.
Insurance Accounts
If you obtained insurance through your workplace, then the employer plan documents dictate the payout terms. If you purchased the insurance independently of your workplace, the insurance company rules will determine where they money goes.
Tips:
I have a few tips for you.
Take beneficiary designations seriously. Include details about your beneficiaries including date of birth and Social Security number.
Update your beneficiary forms after life events like marriage, divorce, or the birth of children. While some states have laws that automatically revoke the designation upon divorce, some do not.
Copies of beneficiary forms should be kept with your other estate planning documents to avoid institutions like banks losing the paperwork which results in costly court battles.
Send duplicate beneficiary forms to the bank, brokerage house, or insurance company and ask for one back with a stamp showing it was received.
Check your online accounts to make sure any changes are reflected online.
Make sure your beneficiaries are aware of, and can easily find, your beneficiary designations. A sizeable amount of unclaimed retirement money is out there.
Many new hires will put down their mother as their beneficiary when they take their first job. Over time, mothers pass away, and this could lead to a potentially nasty court battle should the plan recipient pass away as well.
Works Cited:
https://www.wsj.com/personal-finance/estate-planning-will-money-family-heirs-8f2eb6e8?mod=hp_lead_pos10
https://www.investopedia.com/what-are-401k-beneficiary-rules-5496575
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