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When beneficiary designations contradict other documents

On Behalf of | Mar 24, 2021 | Blog, Estate Administration

When you are creating or updating an estate plan in New Jersey, you may be working with a number of different documents. It is important that they do not contradict one another and that when you do updates, you make sure that they are consistent.

What is a beneficiary designation?

Beneficiary designations are documents that you may fill out when you purchase a life insurance policy or sign up with a retirement account at work. You name one or more beneficiary designations on them. The problem is that it can be easy to forget about them, and a beneficiary designation overrides a will or a trust. You may have named a spouse as beneficiary on a retirement plan, divorced, remarried and never changed the document even if you changed your will or your trust.

When the beneficiary designation is wrong

The beneficiary designation might not name the wrong person entirely, but it could distribute the assets in a way you do not intend. Even if the person who receives all or most of the assets wants to try to follow your wishes, there could be a steep price to pay in tax depending on who the person is and how your estate planning is structured.

What to do

To avoid these scenarios, it might be a good idea to list all estate planning documents and when they were last updated. This could help remind you when you make a change to one that you should review the others as well.

All of the documents should be reviewed after any major changes in your family or every few years. Even if you do not get married, divorced or have children, there could be changes in estate tax or other laws that mean you need to update your estate planning strategy.