The new year often brings a desire for fresh starts and organized living. We schedule dental cleanings, renew gym memberships, and tackle that overflowing storage closet. But as you look ahead, there's one critical financial task that should top your list: reviewing your beneficiary designations.
For our New York clients with existing estate plans, it’s easy to assume that your Will or Trust covers everything. However, many valuable assets, like retirement accounts and life insurance policies, are non-probate assets. This means they pass directly to the individuals you name on the account's beneficiary form—regardless of what your Will states.
If those forms are outdated or incorrect, it can lead to unintended consequences, emotional stress, and complex legal battles for your loved ones. Let's make a resolution to check these vital documents now.
Life Changes Demand Updates
Estate planning is a living process, not a one-time event. The people and relationships in your life shift, and your beneficiary forms must reflect those changes.
Consider the following common life events that necessitate an immediate review:
Marriage or Divorce: A new spouse is often an intended beneficiary. Conversely, a divorce may automatically revoke an ex-spouse's beneficiary status on certain assets in New York, but not all. Reviewing the designations ensures clarity.
The Birth or Adoption of a Child/Grandchild: You may want to update the designations to include your newest family member, or to ensure they are represented per stirpes (by right of representation).
The Death of a Named Beneficiary: If a primary or contingent beneficiary has passed away, you must name a new person. Failing to do so could result in the asset being distributed to your estate, which can trigger probate and unnecessary taxation.
Change in Financial Status: If one of your named beneficiaries is now financially unstable, disabled, or reliant on government benefits, passing a lump sum to them directly could jeopardize their security. In these cases, it might be necessary to name a Trust as the beneficiary instead, providing protection and structure.
Understanding Non-Probate Assets
In New York, some of the most common assets that pass outside of your Will or Trust include:
Retirement Accounts: (401(k)s, IRAs, 403(b)s, etc.)
Life Insurance Policies
Annuities
Transfer-on-Death (TOD) or Pay-on-Death (POD) Bank and Brokerage Accounts
Your designations on these forms supersede your estate planning documents. If a form names your ex-spouse, but your Will names your current spouse, the ex-spouse will generally inherit the asset. Your Will cannot override these documents.
The Simple New Year’s Resolution
This review doesn't have to be daunting. Think of it as a financial check-up. Pull out your most recent statements for your non-probate accounts and verify:
Primary Beneficiary: Is this the person/entity you currently intend to inherit the asset?
Contingent (Secondary) Beneficiary: Is there a back-up person/entity in case the primary beneficiary is not alive when you pass away?
If anything looks incorrect, incomplete, or confusing, it's time to take action. Don't let outdated forms undermine the careful planning you've already done. Let the New Year be the time you ensure your estate plan is completely aligned with your current wishes.
If you have questions about coordinating your beneficiary designations with your New York estate plan or probate, the knowledgeable team at The Fedele Law Group PLLC is here to help you navigate this critical process. Call us today at (631) 519-9831 to schedule a comprehensive review.