“Does it spark joy?” That’s what Japanese organizing guru Marie Kondo says you should ask yourself when you’re deciding whether to keep each item in your home. The author of “The Life-Changing Magic of Tidying Up” says that if something doesn’t bring you happiness, you should set it free so it can delight someone else.

I doubt that anyone would say that their estate plan “sparks joy.” That doesn’t mean you need to get rid of it, though! But these documents, like your possessions, should be reevaluated periodically.

Failing to update them can have serious consequences for your heirs, says Roxanne Jen, a certified specialist by The State Bar of California Board of Legal Specialization in estate planning, trust and probate law. Roxanne, who is an attorney with Rodnunsky & Associates in San Mateo, said she’s advised several families who were surprised, stunned or shocked to learn that they were not the beneficiary of a recently deceased parent’s retirement account.

Instead, an ex-spouse or someone else had been designated to receive the money. In one case, an ex-wife of 15 years pocketed a six-figure sum after her former husband died. He probably never intended for her to receive that windfall, but he had never replaced her as the beneficiary.

Many people are unaware that their will and estate documents do not affect or alter who they named as beneficiaries of their retirement accounts. A beneficiary designation is a contract with a financial institution to pay the money out on your death. A divorce, marriage or estrangement does not change on this contract between an account holder and the financial institution, Roxanne said.

Now is as good a time as any to confirm that your beneficiaries for your retirement funds are up to date. Here’s what to do:

  • Ask your financial adviser to gather the beneficiary information for each institution where you hold a retirement account.
  • If you want to replace your current beneficiaries, be sure to get a confirmation verifying that the changes were processed.
  • You can name multiple beneficiaries and the percentage that each will receive. But more than two or three beneficiaries can unnecessarily complicate your plan.
  • You don’t have to share any of this information with anyone.

When you review your estate plan, make sure to name any close relatives you want to exclude from a share of your non-retirement assets. That instruction seems paradoxical, but it’s important, Roxanne said. Even unacknowledged children—such as those from a separate relationship or casual encounter—have protections in probate court, she said, and can pursue a share of a parent’s estate upon his or her death.

To prevent them from prevailing, estate documents should spell out that this person has been disinherited. Another option is to leave him or her a small amount of money, confirming that they have not been accidentally omitted.

Have more questions? Contact Roxanne Jen at Roxanne.jen (at) Rodnunskylaw.com or 650.285.5400.

 

 


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