People in Kentucky should make sure they pay attention to their beneficiary designations. These documents are commonly used to pass assets from 401(k)s, IRAs, annuities and life insurance policies, but people often forget about them once they have filled them out.
For example, people may have multiple 401(k)s with former employers that list an ex-spouse as beneficiary. Some people might assume that they can use instructions in a will to override the beneficiary designation, but this is not possible. A will only deals with assets that pass through probate, which is not the case for these assets.
Another common error is for people to make no contingency plans in case beneficiaries die. This was the situation for one woman who had an IRA worth more than $1 million. She had three children and named them all as beneficiaries, but one died before she did. She did not update her beneficiary designation to specify whether this person’s children should get their share of the inheritance, so her two surviving children split it between them. The family then become embroiled in litigation.
In general, it is best to review all beneficiary designations and the rest of the estate plan every few years. When updates are made, people should keep copies of all correspondence and paperwork regarding those updates.
There may be other ways in which an individual wants to change their estate planning strategy. For example, a person might want to change the executor appointed in the will or the person chosen to make financial or health care decisions if the person is incapacitated. If a beneficiary runs into problems with creditors or other issues that could pose a threat to that person’s inheritance, the person may want to talk to an attorney about whether creating a trust could be a solution.