Who gets your stuff when you die? And how do you control that?
Those are some of the questions people commonly ask when estate planning comes to mind. A properly drafted will, to be sure, is an important part of that process.
But when it comes to your retirement account, a will may say one thing, but your retirement account’s beneficiary designation will determine what actually happens to those funds.
In Louisiana, the law recognizes two kinds of assets: those that will go through the probate process (probate assets) and those that do not (non-probate assets).
Non probate assets include retirement accounts (such as an IRA or 401K or a 403B if you are a teacher), annuities and life insurance. For many people, these constitute the bulk of their life savings.
So while you might use a will to say who gets the house, the land, the business and momma’s jewelry, a will has no say whatsoever in who gets your life insurance, your retirement plan assets or any money in an annuity you own.
Each of these non-probate assets utilizes a beneficiary designation to control their ultimate distribution at your death. A beneficiary designation takes only a moment to complete, but don’t let the simplicity fool you – they are very significant.
For example, if you’ve been married more than once -- when you got remarried, did you change the beneficiary designation on your retirement plan from your ex-spouse to your current spouse?
What about any life insurance or annuities you own?
There may also be important spousal rights considerations to discuss with an attorney before you make any such changes.
If you make your minor children the beneficiaries (in whole or in part), consider creating a trust in your will that would receive these funds.
I strongly recommend you consult with an experienced advisor and/or attorney when making these decisions.
Good intentions or “gosh, I forgot!” won’t work when it comes time to see who gets these non-probate assets.
The only relevant question is, “What does the beneficiary designation say?”
Make sure you know the answer.