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Beneficiary designations override will in estate planning

Many times planning an estate is not as straightforward as one might think. It is possible for different estate planning documents to seemingly contradict each other when it comes to directions on how to administer an estate’s assets. In this case, applicable estate planning laws in California will decide which estate planning instrument holds more weight.

This type of problem commonly occurs when a person’s will names particular beneficiaries that are different than the beneficiaries named in other financial instruments and accounts. For example, a person’s will may name his or her current spouse as the sole beneficiary of all of this person’s assets. However, if the person’s life insurance policy does not match what the will says this can cause a problem.

Many surviving spouses have been surprised by this after realizing that the beneficiaries named on life insurance policies override the beneficiaries named in wills. This means that if a person forgot to change the beneficiary designations on a life insurance policy after remarrying, the former spouse may end up receiving the balance of the life insurance policy rather than the person’s current spouse. Also, along with life insurance policies, there are various other types of estate planning instruments that would trump the beneficiary designations of a will. These include traditional and Roth IRAs, qualified retirement plans, employment contracts, and various other legal instruments and financial accounts.

Therefore, it is a good idea to regularly update one’s estate planning documents, and, in particular, maintain current beneficiary designations for all financial and legal instruments. This will help ensure one’s intended beneficiaries will actually receive the estate’s assets in California. However, beneficiary designations are just one aspect of estate planning people should consider. This is why it is important to have a comprehensive understanding of estate planning laws.

Source: wmur.com, “Money Matters: The trump card of estate planning“, Marc Hebert, May 21, 2015

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