Make sure your aging parents' beneficiary designations are up to date.
If they are in a situation similar to other middle class families in New York, a large portion of your parents’ Estate will pass by beneficiary designation, not according to their Wills. Consider two of the largest asset categories comprising their combined Estate. They have one or several retirement accounts and they have life insurance and annuity contracts with a death benefit.
These assets are in essence a contract with a third party provider or administrator; and, by the terms of the contract, money contained in them pass according to a valid “beneficiary designation” prepared by your parents (often many years ago) and on file with the administrator or provider. Your parents’ lives are dynamic and their circumstances change over time. What was a logical choice at the time the beneficiary designation was signed may not be appropriate in their current situation.
It is especially important to have a surviving parent review and refresh his or her beneficiary designations after the death of a spouse. In addition to being current, the beneficiary designations should be fluid. Generally no good comes from the death of a named beneficiary when there is no named “contingent beneficiary.” Your parents should always name a person to inherit the retirement account or take the life insurance proceeds in the event the first named beneficiary does not survive.
Barring a disaster, your parents cannot direct how life insurance proceeds and retirement plan accounts are distributed in their Wills. Even a beneficiary designation signed and filed in the distant past will supersede designation in a Will recently signed. Generally, retirement accounts and life insurance represent the bulk of the legacy your parents will leave. Doesn’t it make sense to review the beneficiary designations periodically (i.e., now!) to insure that they reflect your parents’ current wishes and circumstances.