How Much Are You Leaving Your Ex?

George and Andrew lived an enviable life. They had a comfortable home, flourishing careers, and a promising young daughter they had recently adopted. The pair often remarked that it would be hard to imagine how life could get any better.

Then the unthinkable happened.

On an icy winter road, Andrew lost control of his car and plowed into a tree. He died before the paramedics even arrived.

When George received the news, he was devastated. How would he—and their daughter—manage without Andrew’s support? Even in his grief, however, George knew that Andrew’s Will left him everything. As difficult as the loss of his partner was, he thought, at least he would be well provided for.

Or would he?

Andrew’s Will did leave everything to George, but the story didn’t end there. Andrew’s life insurance policy named his parents as the beneficiaries, and on his 401(k), the beneficiary was his ex-partner. Andrew had made these designations before he and George met, and it never occurred to him to change them.

The results were heartbreaking. George was left with the house, Andrew’s car, and the money in their joint checking account. The life insurance proceeds and retirement account—Andrew’s most significant assets—went to others.

When it comes to estate planning, having a current Will is only half the battle. Your Will controls only your “probate estate.” This includes the assets that you own in your name alone and that do not list a beneficiary—assets like bank accounts without a co-owner and household items.

Any property that is owned jointly or that does name a beneficiary transfers outside of probate. These are your “non-probate assets.” Life insurance, retirement accounts, and jointly held real estate are foremost among them. No matter what your Will says, your non-probate assets will transfer to the surviving joint owner or named beneficiary.

When it comes to estate planning, having a current Will is only half the battle.

There are far too many stories of couples like George and Andrew who had current Wills but out-of-date beneficiaries. Unfortunately, once a partner dies, it’s simply too late to correct the problem.

The good news is that updating your beneficiaries is easy. Simply call your life insurance company or retirement plan provider or visit their website. Verify that your beneficiary designations and your Will are set up to work together to provide for the people you care about most.

One word of caution: If your Will includes a trust for a minor child, you need to be careful. If the primary beneficiary is your spouse or partner, the secondary beneficiary should be the trustee. Naming your child as the direct beneficiary will defeat the purpose of having a trust.

In the same way, if your estate plan provides for a “disclaimer trust” to help minimize death taxes, your secondary beneficiary should also be the trustee.

To designate your trustee as a beneficiary, the proper wording is “Trustee under the Last Will and Testament of the Insured” for a life insurance policy. For a retirement account, it’s “Trustee under the Last Will and Testament of the Participant.”

Whatever you do, don’t list the trustee by name. This misstep would make him or her the personal recipient of the asset, rather than a fiduciary who manages the asset on your behalf.

The forms for making these designations are often available online but may need to be printed out and mailed to the provider with an original signature.

Keeping your beneficiaries current is an essential part of your estate plan. As George learned only too well, it can also be a minefield for the unwary.

So don’t leave this to chance. Make sure your beneficiaries are up to date. If you have any questions, ask your attorney for help.