Making Appropriate Beneficiary Designations

Spread the love

You may create the best Estate Plan for your family, but your good intentions may fail.  This is because you must also make appropriate beneficiary designations for your accounts.  Keep in mind that even if you have a Will, not all of your assets will go through probate.  Assets that are contractual in nature stay outside of the probate process.  Example:  Distributions from a life insurance policy or retirement account often bypass probate.  Therefore, ensure that your beneficiary designations harmonize with your plan and intent. 

Why are beneficiary designations important?

Let’s look at an example of why beneficiary designations matter:

Example:  You list your sister as beneficiary before you had a child.  You should update your designations after you have your child, if you intend that your child solely inherit your estate.   

Example:  You have children from both a current and prior marriage.  Consider all options.  For instance, you may designate the older children as beneficiaries of a life insurance plan, but leave your probate assets to the younger children.  Here, while the beneficiary designations would not match the Will, they are still in line with your intent.

How does one make beneficiary designations?

Contact your financial institution to make a change in your beneficiary designations.   If the online form does not allow you to name a trust, ask your contact to mail a paper form.  If the institution does not give you freedom to name as you wish, consider moving the account.  Ensure you also list contingent beneficiaries.

Types of Accounts to Review

  1. Retirement Accounts: 401(k), 403(b), IRA, ESOP’s
  2. Health Savings Accounts: These accounts are often forgotten but can have substantial assets.
  3. Insurance
  4. Annuities
  5. Payable on Death Accounts 
  6. Transfer on Death Accounts 
  7. Pensions
  8. Revocable Transfer on Death Deeds

Unique Issues to Consider

  1. After a divorce, re-visit your Estate Plan and your beneficiary designations.  While married, you likely listed your spouse as primary beneficiary.  Children are usually listed as contingent beneficiaries.  As a result of the divorce, consider removing your ex-spouse.  Keep in mind that a court order mandating life insurance always controls.  Estate planning does not override family court orders.
  2.  You should list the trustee as beneficiary if you intend that the assets flow into the trust.  There are ways to do this correctly.  You should contact an attorney for financial planner to learn more.
  3. Many list a trust as the IRA beneficiary in order to control post-death distributions.  As a result, this greater control limits immediate access to the inherited assets.  However, your spouse can “roll over” the IRA tax-free into his/her own IRA.  Consider this type of trust carefully after weighing the options. 
  4. Special Needs Trusts. If you plan to fund this trust with certain accounts, update the beneficiary designations to name the trust (not the individual).
  5. If your designated person dies, update all forms immediately.

Careful thought goes into estate planning.  Therefore, take the time to plan.  Learn more about Estate Planning.

An Estate Planning, Probate and Business attorney based out of Tampa, Florida, Lori is mom to a fantastic 5-year-old little boy. They love to go on adventures, travel and otherwise enjoy the gorgeous Tampa Bay Community. Lori enjoys reading classic novels, organic gardening, and studying languages. She considers herself well-versed in Seinfeld trivia! Click my name to find me on Facebook.

Disclaimer:  The Law Office of Lori Vella’s website contains general information directed to Florida residents.  This firm does not intend to give legal advice through its pages and/or blog.  If you need legal advice, we encourage you to find an attorney licensed in your state.  This language on this website website does not create an attorney-client relationship between you and this firm. 

Leave a Comment

Your email address will not be published. Required fields are marked *