Much of our wealth is held in insurance policies, retirement accounts, stock accounts and other similar investments which are simply a contract between "we" the owners and the company that provides the insurance or invests our money. A big part of those contract is the designation of beneficiaries where we list who receives the insurance or investment when we die. We need to be careful to make sure we make those designations correctly. The following are a few suggestions:
1. Review and update those designations every 2-5 years to make sure that we have considered births, adoptions, deaths, divorces or anything else that would require a change. I have had many clients tell me after I insisted that they review their designations that they were shocked to learn that they had neglected to add a child who was born after they had created the 401K twenty years ago when they first went to work.
2. Name a contingent beneficiary. If you name your spouse and that is it, if you are both killed in an automobile accident, your beneficiary designation does not get the job done. So name a primary beneficiary and then a secondary or contingent beneficiary such as your children and consider even another listing if all of the primary and secondary beneficiaries predecease you.
3. Do not name a minor beneficiary because there will need to be conservatorship created through a court to manage those funds which is costly and burdensome, and the child will get the entire inheritance upon attaining the age of 18. Instead consider using a trust.
4. Do not name a beneficiary who depends upon a government benefit to survive unless your gift will make that beneficary independently wealthy. You may wish to consider a special needs trust for that beneficiary that will supplement the government benefit.
5. Do not rely on language in a will or trust stating what is to happen to insurance or retirement benefits. The beneficiary designation held by the company that provides the insurance or manages the retirement funds must state what happens to those funds after your death in order to avoid probate of those assets.