Many California residents who have thought about their loved ones and want to protect their future may have established a will years ago. However, in some situations, individuals may leave unintentional beneficiaries such as ex-spouses because they have neglected to make the necessary changes.
One problem occurs when an individual creates a new will but does not change beneficiary designations. A will does not supersede beneficiary designations that are on retirement accounts, 401(k) plans and other financial instruments. Individuals who have not changed beneficiary designations may have their assets given to an ex-spouse. Rules regarding some of these types of accounts mandate that the assets in the account automatically go to an individual’s spouse when he or she dies unless the spouse relinquishes his or her claim and the person completes and files the necessary paperwork. Even if the spouse filed a prenuptial agreement, this will not suffice without the appropriate beneficiary designation completed.
Individuals who want to avoid unintentionally leaving assets to an ex-spouse can take a few steps. For example, they can discuss the possibility of leaving assets to their estate so that their new will transfers assets as the individual intended. Additionally, wills can be updated so that they match the beneficiary designations. If a beneficiary needs to be changed for an IRA account, they can contact the financial institution where the account is held. Additionally, individuals can contact their human resources department if they need to change their 401(k) account beneficiaries. Secondary beneficiaries can also be added.
Individuals who want their assets to go to their children or other beneficiaries instead of an ex-spouse may wish to consult with an estate planning attorney. The attorney can review financial documents in order to determine if the proper steps have been taken to transfer these assets to the intended beneficiaries.
Source: ABC News, “How Your Ex-Spouse Could Inherit Most of Your Money“, Laura Mattia, May 23, 2014