If you have investment accounts, life insurance policies, and/or pension plans with designated beneficiaries that haven’t been reviewed recently, now may be a good time to do exactly that.
Even if your circumstances haven’t changed, it’s worth reviewing your designated beneficiaries with a local wills and estates lawyer, just to make sure that everything remains in accordance with your wishes…because once you’re gone, it will be too late to do anything about it.
Here’s what can happen if you fail to update your beneficiary designations:
Your assets may not go to your chosen beneficiaries.
While your will covers many assets, it is important to understand that for investment accounts, pensions, and life insurance policies, named beneficiaries will be paid irrespective of what is written in your will. These assets essentially bypass your estate. If your will and your account designations are not aligned, your assets could end up being left to the wrong person.
When reviewing your will, policies, pensions, and accounts, consider the following:
· What has changed, if anything—relationships, circumstances, etc.
· Have the beneficiaries’ finances or circumstances changed?
· Are your designations aligned with your estate plan as a whole and how you want other assets to be distributed in your will?
Some life events may warrant an immediate review of your estate plan, such as:
· Marriage/remarriage/divorce
Contrary to popular belief, getting divorced from a named beneficiary doesn’t alter their status automatically on every account. Financial accounts and life insurance policies must be reviewed in the event of a divorce to ensure that your current wishes are reflected.
· Birth or adoption of a child
You may want to consider including new family members among your designations. This is particularly important if your assets are to be divided equally among a named group, such as “all my children.”
· Death of a spouse or beneficiary
In the event of your spouse or a beneficiary dying, if you haven’t named any alternatives (contingent beneficiaries), your accounts should be updated. This is also a critical time to review who you have chosen as the executor of estate in Alberta to ensure they are still able to fulfill the role.
Family disputes may arise.
It’s easy for family members to feel alienated or for arguments to prevail if the necessary reviews haven’t been carried out with respect to named beneficiaries. Although you wouldn’t be alive to witness it, nobody likes the thought of their inaction causing mental anguish to beloved family members.
Unintentional tax burdens may be inflicted on loved ones.
Many people opt to avoid probate fees (estate administration tax) by designating beneficiaries for investment accounts and life insurance, as only those assets that form part of the estate are subject to such fees.
But when naming beneficiaries in financial accounts as well as a will, it can be easy to create an unequal asset distribution without intending to or to impose tax burdens on individuals designated in your will without realizing it. With this in mind, working with a local professional is strongly recommended; they can provide guidance on choosing a will executor in Alberta and help ensure your assets are distributed exactly as you’d like.
Nobody wants their families to fight, experience stress, or be faced with unexpected tax burdens when they die. But without a clear will that is aligned with beneficiary designations for your financial accounts and life insurance policies, it can easily happen.
Review your named beneficiaries today, and get the peace of mind you deserve.
