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Estate planning and choosing beneficiaries

On Behalf of | Nov 11, 2022 | Estate Planning |

A major part of creating an estate plan in California is choosing beneficiaries. These are the individuals who will inherit your assets after you die.

Naming beneficiaries

When people create a will or name beneficiaries for a trust, insurance policy or investment account, they usually name close family members, such as a spouse or children. However, you can opt to name other people or organizations as beneficiaries, such as friends or charities.

One aspect of estate plan preparation that many people don’t understand is that there are assets that are not covered by your will. For example, you will need to name a beneficiary or beneficiaries for each of your insurance policies and investment accounts. Your will does not govern how these accounts and policies are managed after your death.

Updating your beneficiaries

It is important to regularly review and update the beneficiaries in all of your estate planning documents, including wills, trusts, investment accounts and insurance policies. Changes in your life circumstances, such as the birth or adoption of a child, getting married, the death of a spouse, or getting divorced, necessitate changing your beneficiaries.

Primary and contingent beneficiaries

One situation that might occur is that a beneficiary dies before you do. If you don’t update your will or other estate planning documents before your death, those who are managing your estate will have to determine who should receive your assets. In some cases, that will be left up to the court.

A way to avoid this situation is to name both a primary and a contingent beneficiary. The primary beneficiary is the person or organization that will inherit the asset after your death. A contingent beneficiary is a person or organization that will inherit the asset if your primary beneficiary dies or, in the case of an organization, no longer exists.

Choosing beneficiaries is a critical part of your estate plan. Maintaining your plan with regular reviews and updates is the best way to ensure that your wishes are carried out after you die.