Many times people open a new retirement account, obtain a new life insurance policy or open a bank account and fail to designate a beneficiary of the account because they think it’s not important or they just figure “I will designate someone later.” It is important to designate a beneficiary when you open a new account or obtain a new insurance policy because chances are if you don’t designate a beneficiary when you open the account or obtain the insurance policy, you may never do it. Beneficiary designations are an important part of your estate planning process and your beneficiary designations should coincide with your desires found in your will.
Accounts that have beneficiary designations such as retirement accounts (IRAs, 401(k)s, etc.), insurance policies and annuities (to name a few) offer the owner of the account a simple way to ensure that the asset is transferred to the beneficiary of choice upon their death. Therefore, it is extremely important to complete the appropriate beneficiary designation forms upon opening an account and continually updating the beneficiary designation as your estate planning goals change.
So, why is it so important to properly designate a beneficiary for your various accounts? Because, in Pennsylvania, beneficiary designations control over your desires for the disposition of your assets found in your will. One of the most common estate planning mistakes people make is failing to coordinate their beneficiary designations in their various accounts with those found in their will. Because of this, a trusted estate planning advisor should assist you in reviewing your beneficiary designations, coordinating them with your will, and helping you address any change in circumstances that may affect your beneficiary designations going forward.