Beneficiary designations are a key part of estate planning.
Beneficiary designations can make or break an estate plan.
If updated and correct, they can help your assets pass smoothly.
If incorrect, your estate could fall into unwanted hands or prey to unintended consequences.
According to recent Wealth Advisor article titled “Designated Survivor: Beneficiary Designations Can Make–or Break–Your Estate Plan,” certain assets may not pass through a will.
Individuals named on the accounts will receive the accounts directly.
What does this mean?
You should review and update your beneficiary designation regularly.
When should you do this?
At the very least, you should review and update beneficiaries at every major life change.
Did you recently marry or divorce?
Did a family member die?
Was a new child or grandchild born?
Did you move or change jobs?
If the answer is “yes” to any of these, you should review and update your beneficiaries.
You should also review the rest of your estate plan.
Work with an experienced estate planning attorney to ensure all is working together and in working order.
What should you do if you want to pass an account to a minor?
This will often require probate court proceedings to designate a financial custodian.
The court would give this individual responsibility to receive and manage the account on behalf of the minor child.
The court would also place guidelines on the use of the funds.
Court proceedings can be long and expensive.
To save the time and money, work with an experienced estate planning attorney to find a more effective means of transfer.
Do you have a child with special needs?
Naming this child as a direct beneficiary may disqualify him or her from federal or state assistance.
Creating a "supplemental needs trust" as the beneficiary on behalf of this child would be a better option.
Even if you do not have a child with special needs, a revocable trust may be a good option for your estate plan.
You can have more flexibility when it comes to the administration of your estate and assets, greater protections, and more privacy.
You can often name a trust as a beneficiary.
This allows these assets to receive the benefit of trust planning.
Do you have a retirement account?
These include IRAs or 401(k)s.
You should likely name your spouse as a beneficiary.
This provides greater administrative privileges and income tax deferrals to your surviving spouse.
Take the time to understand your options when it comes to coordinating your estate plan with beneficiary designations.
Reviewing and updating your plan with an experienced estate planning attorney will help you make the most effective decisions for your specific circumstances.
Remember: “An ounce of prevention is worth a pound of cure.” When making your financial, tax and estate plans, do not go it alone. Be sure to engage competent professional counsel.
For more information about estate planning in Overland Park, KS (and throughout the rest of Kansas and Missouri), visit our estate planning website and be sure to subscribe to our complimentary estate planning e-newsletter while you are there.
Reference: Wealth Advisor (August 6, 2018) “Designated Survivor: Beneficiary Designations Can Make–or Break–Your Estate Plan”