When people in Michigan and elsewhere have planned well for the future, they likely feel confident that family members and loved ones will be provided for. Plans may include wills & trusts, as well as life insurance policies and retirement accounts. One common mistake people make after creating their plans is to fail to review their beneficiary designations on a regular basis. This is important because one's life and situations can change frequently and rapidly.
Insurance and retirement accounts may accumulate a substantial value before a person dies. The value of these assets is included in the total value of a person's estate. Unless measures are taken, the estate may be subject to estate taxes.
No matter what an estate plan says, one's life insurance policies and retirement accounts have their own beneficiaries. Some people name their minor children as beneficiaries of these assets. Financial advisors say this may be a mistake. The court may designate a trustee to oversee the assets until the child reaches the age of majority.
The court-appointed trustee would have discretion over the distribution of those funds and may make decisions that the deceased would not agree with. To avoid this, advisors recommend setting up a trust to be the beneficiary of the retirement or insurance funds. The trust receives the money, and a designated trustee can distribute the funds only according to the stated instruction within the trust.
Reviewing one's estate plan regularly, especially one's beneficiaries, is recommended universally. Wills & trusts may become obsolete quickly as Michigan laws and personal circumstances change. One's estate planning attorney can offer advice and guidance on the best way to keep one's plan relevant and effective.
Source: The Huffington Post, "Naming a Beneficiary", Terry Savage, Jan. 17, 2017