Designating a beneficiary on a retirement account or insurance policy is not something that can be changed by any other estate planning document. Those beneficiaries will receive the proceeds from the account or policy regardless of what a person’s will may say. People in New Jersey may benefit from remembering this any time they choose to change their will or other estate planning documents.
It’s not enough to disinherit or remove someone from a will. A will has no control over how retirement accounts or insurance policies are distributed. A beneficiary must be specifically removed in order for that person not to inherit the proceeds.
One good time to review beneficiary designations is when there is a job change. A new retirement account and work-funded insurance policy is a good time to review the choice of beneficiary. It is not only the determination of who will receive the proceeds, but how as well. As the amount of these accounts grows, it may be better for the beneficiary to have the proceeds put into a trust in order to avoid any tax ramifications or other issues.
If a party gets divorced, once the divorce papers are finalized, it may be a good idea to change the beneficiary designation on any accounts that had the now ex-spouse receiving the proceeds. The retirement fund or insurance company won’t know or care that their customer is no longer married to the listed beneficiary. The only way to be sure that an ex-spouse does not receive anything is to change the beneficiary designation, and the sooner the better.
Retirement accounts and insurance policies need to be considered part of a New Jersey estate plan. Even though they do not go through probate, they are an integral part of a person’s legacy. A fact of life is that children grow, relationships change and jobs come and go. All of these things can affect the choice of beneficiaries.
Source: dailynewstranscript.com, Baler: Five reasons to review beneficiaries, Maria C. Baler, Sept. 1, 2013