Henry David Thoreau once wrote: “Things do not change; we change.” I’m quite sure Thoreau was not writing about estate planning documents at the time, but he might as well have been. While we are constantly changing – jobs, relationships, homes, finances, family – the estate planning documents that have been sitting in a drawer or safe deposit box for years do not. This includes the beneficiary designations in those documents, which designate the people you chose to inherit your 401(k), company stock, life insurance benefits, and even many bank accounts.

Keeping Wills, Trusts, Estate Plans and Beneficiary Designations Relevant, Current, and Consistent With Changing Desires

If you don’t regularly review and update your beneficiary designations to account for your life’s changes and your changing desires, you could leave financial hardship behind for your loved ones when you pass away. In addition, changes in beneficiary designations generally require certain specific formalities which, if not strictly followed, could result in a failure to accomplish the desired change. Once you are gone, there is nothing that can be done to implement your intended change if it was not done properly while you were alive. Therefore, care must be taken to ensure that a desired change in beneficiaries is properly accomplished so that your expectations and desires are fulfilled.

Blended Families, Adult Children, and Beneficiary Designations

Today, many people have so-called “blended families” where one or both members of a former couple remarry others with children from previous relationships. It makes sense that each spouse would want to provide for his or her blood offspring more so than stepchildren. Because state intestacy laws pass an individual’s probate assets to blood relatives, many people turn to non-probate assets to provide for stepchildren and other non-blood relatives. Non-probate assets include property grounded in contract principles, such as life insurance, pension plans, annuities, and retirement accounts. Many people now have bank accounts with payable or transfer on death provisions which also require naming beneficiaries. Simply put, if you designate a named beneficiary in a contract or on a form provided for that purpose, it is now a non-probate asset which pass directly to the named beneficiary automatically, without the need for any probate proceedings, and without regard to the existence of any trust documents.

Common issues that arise from unchanged beneficiary designations include:

– Not adding additional children as beneficiaries when they are born;
– Not removing deceased people as beneficiaries;
– Not removing ex-spouses or former in-laws as beneficiaries;
– Not making “special arrangements” for dependents with special needs.

A Sad True Story Emphasizes the Need for Prompt Action

I once represented a couple who had met when they were young, became close friends, travelled together, and lived together as roommates for a period of time. They both married other people but kept in touch. Eventually, his wife died, and she got divorced. Now in their 80s, they decided they would live together again, pool their resources, and take care of each other for the remainder of their lives. They asked me to prepare an estate plan, which included pour-over wills for each of them and a joint trust. Among his assets were retirement accounts that contained over $600,000. Consistent with their plan, he wanted these accounts to go to her upon his death. I advised him to contact the financial institutions holding the accounts right away and ensure that the beneficiary designations were changed so that she would be the beneficiary. He underwent a planned surgery the next day, but never recovered, and died in the hospital. The beneficiary designations were never changed. The primary beneficiary was his deceased wife, and the secondary beneficiary was his brother who had dementia and had given his power of attorney to the brother’s wife.

We were lucky. My client contacted the brother’s wife, who said she did not need the money and, recognizing my deceased client’s intent and desires, told my surviving client she would do what was necessary to ensure that my client would receive the funds. Since my client was not a natural heir, we had to jump through procedural hoops to make this happen, but that’s a story for another blog. The point is that most people would not be so generous. Absent the generosity of the brother’s wife, the money would have gone to my deceased client’s brother, a result he no longer wanted. The importance of updating beneficiary designates could not be more pronounced.

Review Your Estate Plan

At Cohen Law Firm, I will review and update your existing estate plan, or create one for those who have never had one. Typically, that plan will include a will, a trust, a power of attorney, and an advance health care directive. Along with writing the documents necessary to create the plan, I will ensure that all of your assets are actually transferred into the new trust and can assist you in changing beneficiary designations. As appropriate, I also handle will and trust interpretation, administration, probate, dispute resolution, and litigation if necessary. I have seen first-hand the difficult consequences and conflicts among family members that can result when outdated estate plans and unchanged beneficiary designations failed to keep up with the lives, expectations, and desires of the individuals. Make sure your estate plan and your beneficiary designations keep up with your life, and that they change as you do.

The Cohen Law Firm: Westlake Village Estate Planning Law Firm

The Cohen Law Firm in Westlake Village serves families in need of estate planning. To talk about setting up an estate plan, amending your existing estate plan or to make an appointment, please call the Cohen Law Firm today at (805) 267-7147 or send an e-mail.

This article has been prepared by Cohen Law Firm for informational purposes only and does not, and is not intended to, constitute legal advice. The information is not provided in the course of an attorney-client relationship and is not intended to substitute for legal advice from an attorney licensed in your jurisdiction.