California residents have many different estate planning tools that they can utilize. Two of the most common are wills and beneficiary designations. Unfortunately, sometimes what each one states conflicts with the other. Knowing what to do in this event can help you to better plan your estate.
What are beneficiary designations?
One of the biggest estate planning mistakes that people make is not aligning their beneficiary designations with their will. In fact, many people tend to forget that they have beneficiary designations and put much of their effort into crafting a will to determine who gets their assets. Not all assets will have a beneficiary designation that you can name, but some do. For example, your 401(k) plan may have you designate a beneficiary.
What happens when a will conflicts with beneficiary designations?
If a person specifies a beneficiary in their will for a certain account that already has a beneficiary designation attached to it, the beneficiary designation will override the will. For example, let’s say that you have your former spouse listed as your beneficiary for your 401(k) retirement plan. You just never changed it after you got divorced. However, you updated your will to show that your children are to be the heirs of your retirement account.
After your passing, your former spouse would be entitled to your 401(k) account as they are the named beneficiary . Even though your will naming your children as heirs to your retirement account may be more recent, it still doesn’t override the existing beneficiary designation associated with your 401(k) retirement account.
As you get started with the estate planning process, you must realize just how important beneficiary designations are. These should be constantly updated as your life changes to ensure that the appropriate person receives your assets upon your passing.