The Importance of Beneficiary Forms
Photo by Unsplash photographer Kelly Sikkema
A beneficiary form, such as on a life insurance policy, supersedes beneficiaries who are named
in someone’s will and trust. Unfortunately, many people mistakenly believe a will or trust trumps
everything. But that is not the case. Beneficiary forms rule!
Here are some frequently asked questions.
Can my ex-spouse get my retirement account?
Possibly. If the account is regulated by the Employee Retirement Income Act (ERISA) and you
did not update your beneficiary form after your divorce, the original beneficiary form naming
your ex-spouse will control. He or she will receive the money.
What if I have a beneficiary form that names my “estate” as the beneficiary?
Naming the estate as the beneficiary of any asset is generally not advised. First, it likely means
there will be a costly and time-consuming probate. Second, many people make a mistake as to
whom the default beneficiaries of the estate will be. Third, there may be negative tax
consequences on certain assets left to an estate, such as 401ks or IRAs.
Won’t my spouse automatically receive my life insurance because we are a community
property state?
No. The life insurance will be paid out to whomever is listed on the beneficiary form. The
surviving spouse, however, may have a community property interest in the life insurance. The
surviving spouse would have to litigate a claim against the estate and include the beneficiaries
named on the form to receive his or her rightful share.
Here are 6 things you should do.
- Review all your financial assets to ensure you have listed a beneficiary form or titled the asset in the name of your trust.
- Name at least one back-up beneficiary on each form.
- Make sure to update your beneficiary forms after each life event: birth, death, divorce, marriage, etc.
- Download an Arizona car beneficiary form at: apps.azdot.gov/files/mvd/mvd-forms-lib/96-0561.pdf.
- Title your home in the name of your trust or record a Beneficiary Deed.
- Meet with a proactive estate planning attorney to help structure your estate to meet your goals including avoiding probate.
A little work up front can prevent frustration and court costs and ensure your assets go to whom
you want.
Cholewka Law is located in Power Ranch and specializes in estate planning.
Contact us at 480-497-3770 to schedule a free “Right Fit” meeting. Or visit gilbertlawoffice.com for more estate planning information.