Proper Estate Planning Includes Beneficiary Designations
When completing your estate plan, it is vitally important that your attorney review and consider your beneficiary designations. Beneficiary designations are the primary method of transfer for many of your important assets. When we say primary, we mean that the beneficiary designation will take precedence over your Will for a select group of your assets. There have been instances where an individual gets divorced, changes their estate planning documents, but because they forgot to change their beneficiary designations leaves assets to their ex-spouse upon passing. An individual’s beneficiary designations are a critical component of complete estate planning that should not be overlooked or ignored by their attorney. See https://www.thestreet.com/financial-advisor-center/be-sure-beneficiary-designations-are-up-to-date.
Important Assets Use Beneficiary Designations
For many of our clients, one of largest, if not the largest asset they own is their retirement account. It may take the form of a 401k, Individual Retirement Account, 403(b) etc. No matter what the form of the retirement account, they all have one thing in common. They use a beneficiary designation form as their primary means of transfer when the owner passes away. The use of the beneficiary designation form also means, that one of the client’s largest assets is going to pass outside of their traditional estate planning documents. This makes it important that the estate planning attorney work in conjunction with the client and their financial advisor to make sure their beneficiary designations are consistent with their wishes under the estate plan. See https://www.thestreet.com/financial-advisor-center/be-sure-beneficiary-designations-are-up-to-date, and www.kiplinger.com/article/retirement/t021-c032-s014-beneficiary-designations-5-big-mistakes-to-avoid.html#:~:text=Many%20people%20might%20not%20realize,the%20asset%20upon%20your%20death. Failure to take into account the beneficiary designations forms would leave a large hole in the client’s estate plan, possibly leaving the retirement accounts to the wrong person. Even worse, the failure to property complete the beneficiary designation forms on retirement accounts could result in punitive tax consequences.
Who Should be Designated as a Beneficiary
Your beneficiary designation, like your estate plan should contain a primary beneficiary and a secondary beneficiary. The primary beneficiary is the person or persons you would want to receive the assets if something happened to you. The secondary beneficiary is the person or persons you would want to receive the asset if something happened to you and the primary beneficiary was deceased. It is always a good idea to name a secondary beneficiary. The secondary beneficiary prevents the transfer of the account to the decedent’s estate which can have punitive tax consequences.
When to Change Your Beneficiary Designation
Just like your estate plan you should be reviewing your beneficiary designations over time. Generally, changes in your life will bring about the need to make changes to your beneficiary designations. As noted in Kiplinger, who you want as beneficiaries change over time and these documents must be reevaluated periodically. See https://www.kiplinger.com/article/retirement/t021-c032-s014-beneficiary-designations-5-big-mistakes-to-avoid.html#:~:text=Many%20people%20might%20not%20realize,the%20asset%20upon%20your%20death. Things such as marriage, divorce, death or the birth of a child may give rise to changes in your beneficiary designations. Keeping these documents up to date with your circumstances and wishes is a critical component of your overall estate plan.
If you or your family are struggling with any Estate Planning or Probate concerns, make an appointment with the experienced St. Charles Estate Planning Attorneys at Jones Elder Law. That way, you can decide what happens to the assets you worked so hard to acquire. If we can help guide you, contact our St. Charles Estate Planning Law Firm at (636) 812-2575 and ask to schedule a call or virtual consultation, what we call a Vision Meeting http://joneselderlaw.com/vision-meeting/. For your safety and ours we have developed the Minimal Contact Planning process to be used while the Covid-19 virus remains a concern.
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