One of the biggest mistakes that Texas estate planners make is to forget about identifying beneficiaries on their retirement plan documentation. Identifying beneficiaries is also important on individual retirement accounts (IRAs) and other financial documentation. The reason that this is vital is because the information beneficiary information identified on these accounts will supersede anything that is mentioned in a will or trust document. If no beneficiaries are identified on the accounts and/or if the wrong beneficiary is identified on an un-updated account, it can create a very complicated problem for one’s heirs.
It is always preferable to change the default beneficiary language that is already included in the documentation of most IRAs and retirement plans. Usually, this language reads that first the spouse will be the beneficiary, then equally the children, then equally the grandchildren. However, what if the will reads differently? This can create confusion for one’s heirs, and sometimes it leads to family disagreements and court battles.
Beneficiaries named in a retirement plan will supersede any beneficiaries named in the will. In some cases, individuals forget to take an ex-spouse’s name off their IRA or retirement plan documentation. When the person passes away, even if he or she updated the will to leave everything to his or her children, the ex-spouse will still inherit the contents of the IRA, and the law is very clear on this point.
Texas residents want the best for their families after they are gone. This includes the wish for their heirs to inherit the assets they intended for them and avoiding the threat of family disagreements when they are gone. One of the benefits of seeking out professional assistance when preparing a will and identifying beneficiaries is that common mistakes regarding identifying beneficiaries like this can be avoided.
Source: journal-topics.com, “The Importance Of Naming Specific Beneficiaries“, Terrance R. Gaertner, Jan. 13, 2015