Why Beneficiary Designation Forms are so Important

Let’s imagine a quick scenario: Bob is a newlywed who starts a new job with great benefits. During the hiring process, he signs up for the life insurance policy offered through his company. As a beneficiary for this policy, he designates his spouse, Amy. Time passes, Amy and Bob get a divorce, and Bob gets remarried to Lisa. Years go by and eventually Bob dies, leaving behind his life insurance. When Lisa goes to collect on Bob’s life insurance policy, the insurance company informs her that she is not the beneficiary of his policy. Instead, the money will go to his first wife, Amy. Despite his divorce, Bob never went back to change his beneficiary designation forms. This is unfortunately a common legal issue for people who have been divorced, separated, or remarried.

These beneficiary designation forms are typically included in the paperwork you fill out the first week at a new job. As a new employee, you will have the option to fill out designation forms for your potential retirement assets, including 401(k) or IRA, your life insurance policy, and other benefits. Contrary to popular belief, these beneficiary designation forms legally override any existing will or trust, regardless of which document is most recent. It is easy to forget about beneficiary designation forms while going through the ups and downs of life. Years can pass, and despite many changes in your personal life, you may never think to go back and updated these documents. This is a huge mistake, especially because it is so easily resolved.

We at Veitengruber Law want to stress the importance of changing these documents whenever your circumstances call for it. Some states even have laws protecting insurance policy holders and their loved ones from these oversights, but the legal importance placed on beneficiary designation forms can lead to problems even in these instances. In Minnesota, for example, there is a revocation-on-divorce statue currently under review in the Supreme Court and the fate of cases affected by this statue hangs in the balance. Regardless of the laws in your state, be proactive and protect yourself and your loved ones by ensuring your assets are designated correctly.

Veitengruber Law recommends doing a periodic self-audit to assess your preparedness in these events. Do you have a 401(k), IRA, or other retirement assets? Do you have a life insurance policy? Who is listed as the beneficiary for these assets? If you find that you do have some changes to make in who is designated as the beneficiary on these forms, don’t wait to change them. Life can change abruptly and unexpectedly, so make sure you are prepared today for whatever comes tomorrow.

The last thing you want is for your loved ones to become entrenched in a legal battle after you are gone. For most of us, our loved ones are at the forefront of our thoughts as we plan for the future. If you have retirement benefits or a life insurance policy, make sure you are including updated beneficiary designation forms in your plans for the future.

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