Designating one or more beneficiaries for your retirement and investment accounts, insurance policies, and bank accounts is an important part of your estate plan.
Beneficiary designations are not done with your attorney. It is your responsibility to specify the beneficiaries when you create an account or new policy, and you have the option to change designations when and how you see fit.
Your beneficiary designations should be considered alongside all the other estate planning decisions you make.
Tips for Beneficiary Designations
Here are some tips to help you handle your beneficiary designations as you go through the process of planning your estate.
(1) Use them: Remember to actually use your beneficiary designations. A failure to name a beneficiary will result in the assets going into the estate. The asset could then be distributed to people other than the person you intended to receive the money.
(2) Add a contingent beneficiary: In addition to naming a primary beneficiary, you should also name a contingent beneficiary. If your primary beneficiary passes away before you, your contingent beneficiary will receive the assets.
(3) Regularly review and update beneficiaries: Just as with other estate planning documents, you should make sure to review your beneficiary designations every few years or after major life events. (Consider setting a reminder on your cell phone calendar.) After a review of your accounts, update the beneficiary designations as needed.
Some major life events that could prompt a review in your beneficiary designations include the following.
- marriage
- divorce
- death of a loved one or beneficiary
- birth of a child
- retirement
(4) Name your trust as beneficiary: You have the option to name your trust as the beneficiary of your account. Whether or not this is the right move will depend on your specific circumstances. For example, with a retirement account, you may lose the spousal rollover and the ability to stretch out tax deferment advantages across multiple generations. While there will be smaller distributions, there will also be less tax paid, and the potential for the IRA to grow larger than it would have otherwise.
If you are interested in naming your trust the beneficiary of your account, you should carefully think through this with your attorney and financial advisors to make sure it is actually advantageous for your situation.
For more information about the steps you should take to properly account for beneficiary designations in your estate plan, contact an experienced attorney at Baker Law Group.
Your Estate Plan
The choices you make with your beneficiary designations may also affect other areas of your estate plan, such as how you choose to pass down your assets to your heirs. Read more about Estate Planning.
About Baker Law Group
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