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Reviewing beneficiary designations is crucial to an estate plan

If you have an IRA, 401(k) or any other type of financial account, it likely comes with a beneficiary designation attached to it. In most cases, the language contained within a beneficiary designation trumps whatever you write in your will. Therefore, it is important that you review your choices regularly either on your own or with the help of a Michigan attorney.

A spouse is often the default beneficiary

Generally speaking, your spouse is the beneficiary of a 401(k) unless he or she waives the right to take ownership of the account upon your death. The same might also be true of a joint brokerage, savings or another type of retirement account that was created during a marriage. If you get divorced, it is in your best interest to review your estate plan as quickly as possible. Otherwise, there is a chance that a former spouse could receive a significant amount of money after you pass.

What happens if you don’t name a beneficiary?

If you don’t fill out a beneficiary designation form for a given account, it will likely revert back to your estate. Without clear instructions as to who should inherit the asset, your heirs may spend time and money squabbling over who is a bank, brokerage or retirement account’s rightful owner.

Consider putting assets into a living trust

It may be possible to place a bank or brokerage account into a trust, which would mean that it could pass to a beneficiary without the need for probate. An estate planning professional may be able to provide more insight into the potential benefits of putting assets into a trust.

It’s critical that you review your estate plan at least once a year. This makes it possible to ensure that the right people are in line to receive money, real property or other assets that have been accumulated throughout your lifetime. It may also be a good idea to review an estate plan after a major life event such as a birth or death in the family.