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Virginians, This Wouldn’t Happen to You…!

Beneficiary designation disasters…Although it might have just a few years ago.  A law was passed in Virginia that prevents our loved ones from becoming victims of our own bad planning.  Picture this — a frantic call to the family lawyer by a recent widow we’ll call Fran. Fran had just learned that her deceased husband Ed’s life insurance proceeds were going to be paid to his ex-wife Sally. As Ed’s current wife, shouldn’t she, not Sally, be entitled to the life insurance proceeds? Ed had changed his will prior to death making Fran the beneficiary of his entire estate. Doesn’t this change the policy designation as well?

As this woman discovered from her lawyer, beneficiary designations can be “the trump card of estate planning.” That is still very true in Virginia because, despite the very carefully defined exception in case of divorce, beneficiary designations still determine where the assets goes, not your will or trust.  I am simply relating this true story as a warning of what can happen if you fail to update your estate plan.

Although the story does not disclose in what state the parties lived, in this case, the ex-wife Sally got her ex-husband's life insurance proceeds. What is of greater importance to Virginians is that if this had not been an ex-wife, it would not have mattered what the will said, it would have gone to the designated beneficiary. With certain financial instruments the beneficiary designations have authority to control the asset disposition regardless of other provisions. A recent WMUR article, titled “Money Matters: The trump card of estate planning, out a handful of good pointers to remember.

As we’ve just read, assigning and frequently reviewing your beneficiary designations is a critical part of estate planning. Those assets whose beneficiary designations “trump” any wills or estate directives include the following:

  • Individual and group life insurance
  • Traditional and Roth IRA’s
  • Qualified retirement plans, such as 401k’s
  • ESOPs (Employee Stock Option Plans)
  • Contractual rights under deferred compensation plans
  • Employment contracts

Remember that making a change in your will or your trust doesn’t automatically make changes to all of your assets listed in those documents. Talk with an estate planning lawyer to cover all of the bases. You want to make sure that your beneficiary designations are updated and in sync with your overall estate planning strategy and its documents.

Here are a couple of other thoughts: always name primary and contingent beneficiaries, and when you make any changes to these documents, get a confirmation from the receiving institution that the changes were actually made and reflect your wishes. Finally, retain copies of your beneficiary documentation, as it might be some time before these materials are needed. You want to make sure that the paperwork can be found easily.

 

You can learn more about this topic as well as other strategies on our website under the tab entitled: estate planning in Virginia. Be sure you also sign up for our complimentary e-newsletter so that you may be informed of all the latest issues that could affect you, your loved ones and your estate planning.  However, proper estate planning is not a do-it-yourself project.  Why not call us for a complimentary consultation at 757-259-0707.  

Reference: WMUR (May 21, 2015) “Money Matters: The trump card of estate planning”

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The unprecedented coronavirus pandemic has taken our entire country by surprise. We understand how difficult this time is for America’s businesses and families.  However, we believe it is vitally important that we make every effort possible to continue to offer solutions that avoid disrupting our important partnership with you, your family and friends.  As you know, estate planning is not something that should wait for a more convenient time, therefore the opportunity to address your important goals both during and after this crisis should not wait.  To that end, we have added the option of a ‘virtual consultation’ to our office process.  You will now have a choice of either meeting with us in our office or in the comfort of your own home.