There are a number of considerations for farmers and ranchers when it comes to estate planning. Things like determining the fair market value of their estate for tax purposes, or deciding the best way to organize their operation to ensure success for the next generation, or selecting the right person to serve as their medical power of attorney all come to mind. One issue that is easy to overlook, however, is the importance of keeping beneficiary designations up to date.
There are certain assets that pass by contract outside the will, which are known as “non-probate assets.” Common examples of these types of assets include life insurance policies, Transfer on Death bank accounts, and retirement accounts with a designated beneficiary. For these assets, it is the beneficiary designation that will govern distribution at the person’s death, regardless of what a will or other estate planning tool might say.
An example of how failure to keep beneficiaries up to date was illustrated well in a 2016 case from the Dallas Court of Appeals in Texas.[1] There, Mr. Switzer passed away in 2014 with a will leaving everything to his wife, Patricia. Prior to his marriage to Patricia, he was hired at the United States Postal Service, and a benefit of that employment was a life insurance policy. He, being unmarried at the time, named his co-worker and then-girlfriend, Kay, as his beneficiary. When Patricia contacted the life insurance company following his death, she learned that Mr. Switzer never made any updates to his beneficiary designations. Despite his being married to Patricia and his will leaving everything to her as his wife, the life insurance was a non-probate asset and would only be paid to the designated beneficiary, the ex-girlfriend, Kay.
It is easy to sign up for benefits or designate beneficiaries when a job is started early in one’s career, and then simply never look back to determine if those beneficiaries are up to date. For many people, a substantial portion of their estate value is governed not by a will, but by these beneficiary designations. Take the time today to do an audit of your own beneficiary designations to ensure they are current and reflect your wishes.
