Creating a last will and testament may provide a tremendous sense of relief to individuals and their loved ones. This feeling is understandable, since a person's assets and property will be distributed according to their own wishes, as opposed to Michigan state law. Interestingly enough, many people miss a critical step in estate planning to ensure their assets are bequeathed to the intended beneficiary: Updating the listed beneficiaries on certain financial assets.
When a person opens up a bank or investment account, he or she probably completed a payable-on-death or transfer-on-death form. In many cases this can circumvent the tax consequences or hassle of moving assets when a loved one passes away. However, it's important to note that if a person's will and the financial documentation don't match up, the assets could end up with the wrong person. This is because assets will be passed on to person listed on the payable-on-death form, regardless of what a will says.
Furthermore, it may be helpful to be proactive with listing beneficiaries. By listing additional beneficiaries on a financial policy, the correct person will receive the asset if the original beneficiary passes away.
In general, it may be best to update beneficiaries when major life changes occur. Estate law observers note that marriage, divorce or the birth of a child may all be reasons to consider modifications.
Estate planning isn't necessarily a one-time effort. In order to make sure that everything is in order, it may be necessary to review an estate plan and make change from time to time. This way, a person can truly feel prepared for all of life's twists and turns.
Source: MarketWatch.com, "Don’t make the No. 1 estate-planning goof," Harper Willis, Jan. 23, 2014