Creating an estate plan may follow a standard process, but you can take a different approach based on your needs and unique circumstances. Some people invest in property, while some prefer to have financial products, such as retirement or insurance plans. Fortunately, there are ways to make these assets work in tandem, including beneficiary designations that can complement other estate planning options if used appropriately.
How beneficiary designations work
Whether you have a will or a trust, you can plan beneficiary designations to help benefit your inheritors after you pass away. When identifying beneficiaries in a will, the estate can enter probate and administer its assets accordingly. On the other hand, financial products have separate terms and conditions, establishing that the benefits will go to the listed beneficiary in the agreement.
This setup means that even if a will states a set of people to receive your estate, the policy or plan agreement can override its designations, prioritizing the named beneficiary in the policy over the will. Because of this possibility, it is essential to update beneficiary designations regularly. Some financial products may also ask for primary and contingency beneficiaries, depending on the situation.
Making beneficiary designations with purpose
When investing in an insurance or retirement policy, you may not consider how the beneficiary designation could impact what happens in the future. Without ample deliberation, it may clash with other estate planning tools when it is time to administer your assets after your death.
Luckily, you can prepare and prevent this from happening. Instead, you can make designations that work with your entire estate plan, updating it along with other arrangements you have in place. Doing so can prevent your estate plan from becoming irrelevant over time.
