If your life insurance lists only “Jr.” as the beneficiary, he will get 100% of the death benefit and your daughter will get only half of the assets that do not have a beneficiary designation.
How would your daughter feel about receiving no part of that death benefit? No matter how good your son is, there’s no way to guarantee that he will do the right thing and share those assets with his sister as you wanted. The result could be a family fracture that keeps siblings, cousins, and even grandchildren apart.
This is one aspect of estate planning many people don’t even consider, says the Observer-Reporter in the article “Improper estate planning can lead to familial conflict.”
“Dying intestate” is the term used to describe the legal status of someone who has died without a will. The laws of your state will then dictate what happens to your assets. Most of your tangible possessions will be distributed following probate. If your estate is complex, for example, and you own property in more than one state, the process will take a long time and the costs will be high. A will—and an estate plan that is updated regularly—can prevent this and many other scenarios.
Some of your assets do not pass to heirs through a will. This includes retirement accounts, life insurance policies and annuities. All accounts that have named beneficiaries go directly to the people who are named. If they predecease you, then the contingent beneficiary receives the asset.
Reviewing beneficiary designations is as important as reviewing your entire estate plan. If you name only your son as the beneficiary for your insurance policy, then later welcome a daughter into your family by birth or adoption, you’ll want to add her as a named beneficiary as well. Otherwise, when you die, only your son will receive the proceeds.
Anytime a life event occurs—births, deaths, divorces, marriages—is the right time to review your beneficiary designations.
Here’s the key: you can make these changes when you are living. When you die, the designation is irrevocable.
Your estate plan also needs to include two different types of Power of Attorney (POA). The first is to make financial decisions if you are incapacitated, and the second is to make health decisions.
The person you give the POA to has authority to make these decisions for you, only while you are alive. The POA terminates upon your death.
Most people name their spouse for their healthcare POA, but if your spouse passes and you have adult children, one of them should be named your healthcare POA. Regulations about healthcare have put medical professionals into a difficult situation, when they want to have the family involved but are legally unable to share information. If your children disagree about your care, emergency situations may also become more challenging. If you have a blended family, things can get really divisive.
Here’s a celebrity story that serves as a perfect example. A famous father made his third wife his executor and gave her total control over his business, despite the fact that his son was equally famous and the top executive in that business, as well as its public face. The son was baffled when he learned that the third wife now controlled the business, including the rights to his own name. When the father died, a long, expensive and unpleasant estate battle began. The son was Dale Earnhardt Jr.
Keep your family together, ensure that assets are distributed as you want and make sure to have conversations with your family members, so the family you devoted a lifetime to creating continues as part of your legacy. Speak with an estate planning attorney to create the documents and if need be, help you communicate with your family members. Don’t overlook what’s at the heart of estate planning: your family.
Reference: Observer-Reporter (Dec. 12, 2018) “Improper estate planning can lead to familial conflict”
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