You may have prepared your will years ago, but time marches on, and many things have probably changed in your life.
This is a good time for you to review your will and update your beneficiary designations. Here are five areas that deserve special attention:
1. Making spousal changes
If you divorced and remarried since you prepared your will, remember that it is crucial to change your beneficiary designations. Otherwise, assets will go to your former spouse when you pass away when you likely wanted them to go to the spouse who survives you.
2. Adding contingent beneficiaries
If you only named primary beneficiaries originally, now is the time to add contingent beneficiaries in case your primary selections predecease you.
3. Naming minors
If you name a minor child as the direct beneficiary of your life insurance policy, he or she will likely receive the proceeds upon turning 18, which is not usually a financially mature age. Instead, you can establish a testamentary trust in your will and name a trustee who will manage the assets until your child reaches the age that you choose.
4. Naming special needs beneficiaries
Naming a special needs person as a direct beneficiary may disqualify him or her from receiving much-needed government benefits. You can provide an inheritance by setting up a special needs trust that will not affect the receipt of Supplemental Security Income.
5. Including irresponsible loved ones
If you have a family member that you know is not financially responsible but to whom you want to leave an inheritance, you can set up a lifetime spendthrift trust for his or her benefit. Through this kind of trust, the funds will remain safe from creditors.
Failing to name beneficiaries
If you have not named any beneficiaries at all, this is your chance to do so. Otherwise, an asset like your retirement account or life insurance policy will have to go through probate, and the proceeds may eventually go to someone whom you would not have chosen.