Five holes in your will: How to fill the void

Assets on beneficiary forms

Life insurance is typically among a physician's major assets, and those policies are controlled by beneficiary forms. Suppose you name your spouse as sole beneficiary and he or she passes away before you do. The insurance payout could end up being part of your estate, not protected from any claims against it. Ideally, you should put the policy into a trust, for tax savings. But, at the very least, you should simply list your children as secondary beneficiaries, which will protect the funds from creditors.

Remember, too, to review all beneficiary forms when planning your estate. There may be more assets affected than you think. For example, you might have named beneficiaries for CDs, savings bonds, and bank and brokerage accounts.

Marital agreements

Divorce settlements and prenuptial agreements often affect estates significantly and unexpectedly: When there's a conflict between such an agreement and a will, the former takes precedence. So if your agreement says you'll leave a certain piece of real estate to a spouse, it doesn't matter what you say in your will later. The agreement will prevail.

"If you promise a percentage of assets, you'll be less locked in," says Norristown, PA, attorney David J. Schiller, "because you could decrease the size of your estate by the gifts you make to others during your lifetime."

In particular, physicians should watch out for the impact that marital agreements may have on pension plans. By law, a surviving spouse generally has rights under all retirement plans, even if he or she isn't specified as the beneficiary. If a doctor's fiancée waives claim to a retirement plan in a prenuptial agreement, there's still a trap. Since only a spouse can waive such rights, the fiancée should sign the plan's waiver form after the wedding, or else the prenup waiver may fail.

The law can also favor ex-spouses. Suppose you name your spouse as beneficiary of a pension plan but forget to change it when you divorce. Later, in the divorce papers, the two of you mutually give up "any right, title, or interest in and to any earnings... pension plans, profit-sharing plans... or property" of the other. A federal appeals court ruled several years ago that because a similar agreement didn't specifically mention the plan in question, the ex-wife was still entitled to it.

Marital and divorce agreements are often made under great stress, and courts can be unpredictable. So have an estate-planning lawyer review any such agreements-ideally, before you sign them.