Does Your Business Have a Beneficiary?
Working as a financial planner, I see a multitude of mistakes when it comes to will preparation. One of the most common mistakes I see is when people make their wills and don’t coordinate the will with the overall beneficiary designations they have chosen. Many entrepreneurs forget to consider their business. What will happen to it when you die? Does the business have a beneficiary to run it?
Most people believe that the written will supersedes their beneficiary designations. This is extremely inaccurate. When you name a beneficiary on a life insurance policy, a 401(k) plan, or an IRA, it is essentially a contract of law. Sure, you could attempt to leave your IRA to your brother in your will, for example, but if the beneficiary designation on the IRA says that 100% is supposed to go to your sister it won’t matter. Despite what your will says, the IRA will go to the named beneficiary. The same is true for your business.
More from Ted: When Can I Take Money from My IRA?
Most beneficiary designation forms today allow for both a primary beneficiary and a contingent beneficiary which should give you ample opportunity to plan out your overall estate. It’s important to get a qualified estate plan attorney involved when you draft your will as different states have different rules. Having a qualified professional help you will make certain your wishes are carried out in an orderly fashion as quickly as possible.
This is not a one and done decision, either. As your life changes through trigger moments such as marriage, the birth of a child, divorce, remarriage, etc., it is incredibly important to reassess what you have done in terms of will preparation and beneficiary designations. Otherwise, your plan may not be carried out in the fashion you envisioned.
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