The Importance of Updating Your Beneficiaries
Estate planning issues aren’t a lot of fun, but they are necessary if you don’t want to cause a great deal of stress and expense for those you leave behind. Whether you are trying to figure out who should receive your life insurance proceeds, or if your RRSP's should go to your children, it’s important to decide how you want your possessions and assets distributed.
If you care about who gets your stuff and your money, it’s important that you do more than just create a will as part of an estate plan. You also need to double check your beneficiaries.
Your Listed Beneficiaries Trump Your Will
Many people are tempted to think that once the will is made, the work is done. Everything is set up. However, it’s important to realize that listed beneficiaries trump wills. No matter how explicit you are in your will, and no many how many witnesses sign, if the beneficiary on a life insurance policy or retirement account are different, it’s the listed beneficiary that gets the money.
When you experience a major life change, it’s important to review your beneficiary information, and change it to reflect your desires. Many people forget to change beneficiaries on retirement accounts and life insurance policies when a spouse dies or when there is a divorce. However, this is a mistake. Your listed beneficiary will receive the money, no matter what your will says. As you create your will, make sure to review your beneficiaries to make sure that everything matches up the way you want it to.
Pay Attention to Bank Accounts
Another tricky point is the bank account. Sometimes, when you open an account, you are able to designate someone to receive your money. This is known as “transferable on death.” When you designate someone, this information also supersedes the will. You should also realize that some banks don’t even have this option. If you die, the account will go to probate. For accounts that aren’t transferable on death, it might be advisable to open a joint account so that your spouse can access the money without extra expense.
Changing Your Beneficiaries
In most cases, it’s possible to change your beneficiary by filling out the proper paperwork. Each organization has its own processes for changing beneficiaries, so you should contact the company to find out what those are. In many cases, though, all you need to do is fill out a form and send it in. After you have gone through the steps necessary for changing a beneficiary, follow up and check to make sure the switch has been made. Verify that your wishes are being followed.
If you care about what happens to your assets after you pass on, it’s important to make your wishes known. A good estate plan, including a will, can help you ensure that your desires are followed. However, you shouldn’t forget about your beneficiaries. Double check to make sure that your beneficiaries match your will.
source: Canadian Finance Blog
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