Life happens. There are marriages, but there are also divorces. Babies are born, while loved ones also pass away. All of these situations -- no matter how happy or sad -- have an impact on our lives. And, from an estate planning point of view, also effect just who our money may go to.
Take for example in the case of divorce. While the couple was married, the wife had her husband designated as the primary beneficiary of her retirement plan and life insurance policy. At the time, this surely made the most sense. However, once the couple divorced, would she really want this money to still go to her ex-husband?
Most likely, the answer is no. This is why it is important to take a look at estate plans and beneficiaries after there are major life changes and update them appropriately.
Recently, an article titled "Don't make the No. 1 estate-planning goof," looked at some of the more common life changes and how these could affect an estate plan.
Marriage, divorce and remarriage were not the only things mentioned. Rather, changing jobs, a child or grandchild being born, a financial institution changing ownership hands and a primary beneficiary dying are all life circumstances that would warrant an update to any existing estate plans.
In some cases though, like the birth of a grandchild, it is not as simple as just adding a beneficiary. Rather, since a minor cannot be designated as a beneficiary in Florida, a conservator would be designated to oversee the assets until the minor turned 18. To avoid this, the recommendation would be to work with an estate planning attorney to set up a trust for the grandchild. The trust would then be named the beneficiary.
Source: The Wall Street Journal, "Don't make the No. 1 estate-planning goof," Harper Willis, Jan. 23, 2014