When you have major life-changing events such as a birth, death or divorce, it’s important to update both your will and your beneficiary designations. But what happens if your beneficiaries and your will contradict each other? Which document take precedent – the will or the account?
A beneficiary designation supersedes a will. If you get married or your spouse dies, or you have a new grandchild and update your will or trust, but do not update your IRA, retirement account, life insurance, annuities and other accounts the information on your beneficiary designation form will override your will in Illinois and other states. This means that if you get divorced and remarry, but do not update your beneficiaries, your former spouse is the legal heir to those accounts if you named him the beneficiary while you were married. If your heirs decide to fight the beneficiary designation in court, litigation can be expensive and take months.
If you do not name a beneficiary on your retirement or other financial documents, and you do not have a will, state laws will determine who inherits your assets – and it can take many months until your loved ones can access those funds, and cause them unneeded stress.
How To Avoid Beneficiary Mistakes
It’s important to review your beneficiary designations when you have any major life changes to make sure that your wishes are clear and legally documented.
1. Name A Contingent Beneficiary
If you do not name a contingent beneficiary for an insurance policy, pension, or retirement plan, and the primary beneficiary predeceases you, on your death the benefits will likely be paid according to Illinois intestacy laws.
2. Update Your Beneficiaries
Any time you have an important life change, you should review and update your beneficiary designations.
3. Don’t Make Your Estate The Beneficiary – unless you have a trust
Don’t name your estate as the beneficiary. If your estate is the beneficiary, then the funds in your IRA, annuities, life insurance policy and other financial investment accounts will go through probate – costing your heirs time, money and stress. However, you may designate your trust as the beneficiary.
An experienced estate planning attorney can help you review your estate plan and make sure that your will, trusts, investment accounts and other legal documents are up to date and meet Illinois laws and requirements.
When there is a major change in your life such as a marriage, divorce, a death or the birth of a child, call us at 630-864-5835 as soon as possible to update your estate plan and make sure your loved ones are protected.
The Estate and Probate Legal Group Serves Cook, Dupage, Kane, Lake, and Will counties in Illinois.