Why Should You Update Beneficiaries to Avoid Probate Problems?
When was the last time you reviewed the beneficiaries listed on your life insurance, retirement accounts, or savings accounts? If it has been a long time or you have experienced a major life change, you may want to look at those documents. You may have filled them out years ago, but in California, they can make or break your estate plan.
Here is why you should update your beneficiaries to avoid probate problems so that your loved ones won’t get tangled in this process.
Why Beneficiary Designations Are Important
Whenever you set up a life insurance policy, IRA, or bank account, you will be asked to name a beneficiary. This is the person who gets the money when you pass away. Keep in mind that these designations usually override your will.
For example, if your will states, “everything goes to my spouse,” but your 401(k) still lists your ex from 15 years ago, your ex-spouse is legally entitled to the money. It doesn’t matter what your will says or how your family feels. The financial institution has to honor the name on that form.
In these situations, California’s probate rules come into play. If you do not have a valid, living beneficiary listed, that money does not automatically go to your family. Instead, it goes straight into probate.
Why Probate Should Be Avoided in California
Probate in California is slow and expensive. Even a simple estate can take six months to a year to settle. If you have a more complicated one, it could take two years or longer. During that time, your family’s access to funds is restricted while your executor is handling mountains of paperwork.
When your assets end up in probate, the court decides who receives them according to state law, not according to your wishes. If your beneficiary designations are outdated or missing, those assets might go to relatives you never intended to include, or they could be divided in ways that are unfair to the people you actually wanted to help. In short, probate can also rewrite your legacy.
When you have current, accurate beneficiary designations, you bypass all that. The funds go directly to your named beneficiaries. Many times, this happens within weeks.
How Often Should You Update Your Beneficiaries?
You just cannot set and forget your beneficiary designations. Your documents need to be reviewed whenever life changes significantly. That includes:
- Getting married or divorced
- Having or adopting a child
- Losing a loved one
- Opening a new account or changing employers
- Updating your will or trust
Even if nothing major has happened, you might want to check every couple of years to make sure your financial institutions have the right names on file. Mergers, clerical errors, or lost paperwork can easily complicate matters and throw your estate into probate.
Updating Your Beneficiaries
Most updates are easy. Many times, you can log in to your financial accounts and make changes online. If not, you can request a paper form from your bank, insurance company, or HR department. When updating, make sure to:
- Use full legal names, no nicknames or abbreviations.
- Add both primary and contingent beneficiaries.
- Keep a copy of the updated forms with your estate plan.
- Let your executor or attorney know where those documents are stored.
If you are naming minors as beneficiaries, you will need to set up a trust or name a guardian, since minors cannot directly inherit under California law.
Get Help for Your California Estate
Should you update your beneficiaries to avoid the probate process? The answer is yes. California’s probate process is one of the most expensive in the country. Updating your beneficiaries is one of the simplest ways to keep your assets going to the right people in your life.
If you want to make sure your beneficiary designations are correct, you may want to reach out to a skilled legal probate professional. At California Probate, we can help with these parts of your estate. Whether you are trying to avoid the process or need help with the legal proceedings, we are standing by to assist. Schedule a consultation today.