Did you know that when you die, the majority of your wealth could go to someone NOT named in your Last Will and Testament? This includes every dollar saved in your retirement accounts.

When most people think of estate planning, there’s a handful of tools and documents they think they need.

• A Will.
• Financial and Healthcare Powers of Attorney.
• Perhaps a Trust, if relevant.

But there’s an incredibly simple (and powerful!) estate planning tool that is easy to overlook.  And for certain financial assets, this could matter more than your Will when it comes to who gets your money. Especially your retirement and other investment accounts.

A small mistake with big estate planning consequences.

Would you rather leave a financial legacy, or a financial mess?

If you’re like most of us, the last thing you want is to have your family fighting over your money when you’re gone.

And yet, it happens. When someone’s intentions aren’t clear or honored… Or when a planning mistake leads to money going where they didn’t think it would go… Families end up piling arguments on top of grief. It’s no good.

And yet one small mistake in the estate planning process could lead to your money not going where you expect. And it might not be noticed until it’s too late to do anything about it.

The good news is:

There’s a simple 5-minute fix — once you know how to spot it, and what to do. It all hinges on who’s listed as the beneficiaries on your financial accounts.

How are financial account beneficiaries treated in estate planning?

When you designate a beneficiary on your financial accounts, it’s treated as a legal contract with the financial institution.

And this has huge implications for estate planning.

As a contract with the bank, your beneficiary designation is executed before a Will, before probate. The official designation is typically “Payable-on-Death” or “Transfer-on-Death” (POD or TOD). And with a POD or TOD designation, that money goes straight to your named beneficiaries and never enters your estate.

In fact, the only way certain accounts end up in your estate and covered by your Will or the probate process is if you leave the beneficiary designation blank.

Because your account beneficiaries supersede your Will, you want to make sure they’re kept up to date and aligned with your wishes.

Reviewing beneficiaries is a critical part of regular financial planning.

Updating your beneficiaries can be a simple 5-minute fix. And as it should be clear by now, it could have a big impact on the financial legacy you leave.

That’s why we integrate a quick beneficiary review into our regular financial planning process with every client.

Whenever we open new accounts with clients, we check with the client that the correct beneficiaries are being added to the account. And as our team gathers resources for each Planning Meeting with our advisors, we’re making sure the advisor has current beneficiary information to review with the client.

For the most part, it becomes a quick check into, “Is this still the correct beneficiary information?” In fact, it’s often so quick, you may not even remember that it happened at your last planning meeting. But when it needs to be updated, it can be a relief knowing your current wishes will be honored.

That said, we can only review what we can see. We’re not able to update beneficiaries on accounts we don’t manage. And if you have beneficiaries designated (or not!) on different accounts at different institutions, we’re not able to give you a more comprehensive picture of how your financial assets will transfer.

This can be one small advantage to simplifying your finances under one firm — so you can regularly review, each year and in one stop, how all your covered financial assets will be treated when you’re gone and no longer able to weigh in.

Whatever you choose, and wherever you have your accounts, it’s worth making sure your beneficiary information is up to date!

This article was written for financial advisory clients of Asset Strategies. If you’re not yet a client and you’d like to speak with a financial advisor, request a Welcome Call here.