People who want to protect their estate assets and ensure that their wishes are upheld after they pass away will often meet with attorneys to discuss their estate planning options and employ the planning tools that best meet their needs. In some instances, though, they overlook a key component of estate planning, which is designating beneficiaries for certain accounts. Beneficiary designations are often misunderstood and overlooked, and it is wise for anyone wondering what such designations are and why they are an important part of estate planning to consult an experienced estate planning attorney as soon as possible.
Designating Beneficiaries
Generally, when people pass away, their estate must pass through probate in order for their assets to be disbursed to their heirs and beneficiaries. There are exceptions to the general rule, however. In other words, there are certain accounts that are not subject to probate but transfer directly to named beneficiaries after the account holder’s death. Such accounts typically include life insurance policies, 401Ks, 403Bs, IRAs, and other retirement accounts.
In some instances, the law requires that a married account holder designate their spouse as their beneficiary. If no such law binds an account holder, they are generally free to designate any person they choose as their beneficiary. Most accounts permit people to name a primary beneficiary and secondary and subsequent beneficiaries who will obtain rights to the account or policy assets in the event the primary beneficiary is deceased or unavailable. In many cases, people can designate more than one person as their primary beneficiary and can set forth the percentage of the asset they would like to grant each party. For example, they may designate their spouse as the beneficiary of 50% of their assets and designate their children as the beneficiaries of the remainder of their assets, to be shared per capita or per stirpes. In some instances, a person may choose to designate their estate as the beneficiary or an account or life insurance policy.
Factors to Consider When Designating Beneficiaries
People are often inclined to designate their spouse or closest relative as beneficiaries. While such designations, there are multiple factors people should consider prior to making their final decision. For example, if the person they wish to designate as their primary beneficiary is ill or elderly, they should make sure to name a secondary beneficiary in the event the primary beneficiary predeceases them. Similarly, if the person they wish to designate as a beneficiary suffers from a condition that would render them incapacitated, it may not be the best decision to transfer assets directly to them. Even after people designate beneficiaries, they should not assume that the matter is settled. Instead, they should review their beneficiary designations from time to time to ensure that they still reflect their goals.
Talk to an Experienced Estate Planning Attorney Today
It is essential for people with life insurance, retirement accounts, and life insurance policies to designate beneficiaries, as the failure to do so can cause significant issues after their death. If you have questions about beneficiary designations call our office at 561-395-6800 or fill out our contact form. We can help you create a tailored plan that meets your specific needs and goals.