Creating an estate plan is essential for preparing for the future and having peace of mind. However, estate planning can feel very complex since there are so many aspects to it, such as appointing beneficiary designations.
Whether you have already gotten started with your estate plan or are starting from scratch, you should consider getting the help of a Michigan estate planning lawyer. At Warren & Schairbaum, PLLC, our collective years of experience handling estate planning cases have equipped us with the experience needed to help our clients navigate this process with confidence and peace of mind.
What Are Beneficiary Designations?
Beneficiary designations in Michigan allow you to legally name an individual who will receive one of your assets upon the time of your death. A beneficiary is different from a traditional heir, since an heir is someone who will automatically gain ownership of inherited property if the estate is intestate.
These designations are most commonly used for:
- Life insurance policies.
- Retirement accounts, such as 401(k) or IRA accounts.
- Transfer-on-death investment accounts.
- Payable-on-death bank accounts.
Additionally, if you have a trust, you will name your beneficiaries in the trust document. Or you could choose to add beneficiaries to your last will and testament.
The reason why beneficiary designations are so popular in Michigan is that they can help your loved ones avoid probate court, which can be lengthy, costly and is a public matter. Beneficiary designations allow you to name a beneficiary so that assets can go directly to your loved ones instead of having to first go through probate.
Beneficiary designations also give you more control over who will get specific assets when you pass away, removing all confusion.
How Beneficiary Designations Work With a Will
Navigating beneficiary designations and wills during estate planning can feel very overwhelming, especially if your estate planning documents contradict one another. That is why it is essential that all of your estate planning documents are accurate and consistent throughout. However, if there are inconsistencies, what happens next?
When it comes to beneficiary designations versus your will, the designations usually take precedence. This means that your beneficiary designations will usually override the will, ensuring those assets go to the named individuals.
Common Mistakes to Avoid
There are many beneficiary designation mistakes you could potentially make that could alter how your assets are distributed to your loved ones. That is why it is recommended that you work with an estate planning attorney in Michigan instead of trying to handle your estate plan all on your own.
An attorney will have experience in this area and can help you avoid some of the most common beneficiary designation mistakes, such as:
- Out-of-date beneficiary designations: If you don’t regularly review your beneficiary designations, this could result in them being out-of-date. Usually, this means that your beneficiary paperwork hasn’t been updated for quite some time and may provide incorrect information or may conflict with your other estate planning documents.
- Naming the wrong beneficiaries: If several family members share the same name, you risk having your assets not go to the right person. Also, if you name a minor as a beneficiary, they often won’t be able to gain ownership of the asset until they’re an adult.
- Not having backup beneficiaries: You should have both primary and contingent beneficiaries to protect your assets. A contingent beneficiary is a backup individual who will receive the asset if your primary beneficiary is unable to.
When Beneficiary Designations Should Be Reviewed
As explained above, one of the most common mistakes you can make with beneficiary designations is not keeping them up-to-date. Like every other aspect of your estate plan, these designations need reviewing so that they accurately reflect your estate and your last wishes.
A good rule of thumb to follow is to review your beneficiary designations every 2 to 3 years. However, you should also review these designations anytime you experience a significant life event that could impact your estate plan. Examples of these types of life events include:
- A marriage
- A divorce
- The birth or adoption of children
- The death of a beneficiary
- Retirement
- Significant financial changes
Also, if you make any significant changes to the rest of your estate plan, you should review your beneficiary designations. This can help prevent inconsistencies throughout your estate planning documents so that there is no confusion later on.
Why Professional Estate Planning Matters
Tempting though it may be to handle your estate plan on your own, this is never recommended. Your estate plan is a legally binding tool that can either make this process easier or more challenging.
Trying to handle your estate plan on your own increases the risk of family disputes, tax implications, probate issues, and unintended asset distributions. Whereas when you work with an estate planning attorney, they can help keep your estate plan consistent and in line with Michigan law.
FAQs
Can my will override a beneficiary designation?
No. Beneficiary designations in Michigan typically take precedence anytime there is an inconsistency regarding what happens to certain assets.
How often should I review my beneficiary designations?
Generally speaking, you should review your beneficiary designations every few years to make sure they are up-to-date. But you should also review these designations if you experience any major life events, such as a death in the family, marriage, or divorce.
Should I name my estate as my beneficiary?
It will depend on the circumstances, but usually this isn’t recommended. Naming your estate as your beneficiary could result in otherwise avoidable probate and tax issues. You can, however, name your trust as a beneficiary.
Can I name multiple beneficiaries?
Yes. You can, and you often should name multiple beneficiaries, including primary and contingent beneficiaries. However it is important that you review these carefully so that every designation is indicated exactly as intended.
Get In Touch With a Michigan Estate Planning Attorney Today
If you want to avoid probate with beneficiary designations, you need to understand how these designations work in combination with the rest of your estate plan. You also need to know when to update these designations so that they accurately reflect your circumstances and last wishes. Contact us today at Warren & Schairbaum, PLLC, by calling us directly at 734-769-9300 to discuss your situation with an experienced attorney.
