Beneficiary designations are an important part of your estate plan and must be monitored regularly. Designations on retirement accounts, investments, and life insurance are the most common forms that people will encounter. But, there are many assets that can be transferred via beneficiary designation. Multiple beneficiaries can be named with a designated percentage to each. Charitable donations can be made using this method and may result in tax incentives. You need to fully understand the process to be sure distribution to a beneficiary fulfills your intent and protects the gift from being squandered or collected by a creditor of the beneficiary.
Close monitoring of your beneficiary designations is crucial and it is important to name a contingent beneficiary to assure the asset will be distributed as you intended in the event your primary beneficiary is unable to collect the gift due to death, or disability.
More than once I have experienced an instance where an ex-spouse remains on a life insurance policy. The widow and family were shocked to learn that the previous spouse would be inheriting the life insurance, yet the decedent had been married to someone else for over 20 years. And, the ex-spouse was equally shocked when they learned of the sudden windfall. Some people will understand the mistake and try to make things “right” but others will not. The named beneficiary is within their right to receive and retain the policy proceeds.
USE OF A REVOCABLE TRUST
In many instances, a revocable trust is named as a beneficiary. The trust should include provisions to assure your intent is fulfilled without interference from sources beyond your control. For instance – Are you concerned that one of your children may become divorced or has creditors that will end up with the inheritance rather than the inheritance being protected to ensure that it benefits the beneficiary? Is it appropriate to distribute the beneficiaries’ entire inheritance outright to them or is it better to hold the inheritance in trust for the benefit of that beneficiary with someone else managing the money?
Consult an estate planning attorney to discuss your gifting intent and how your intent can be fully realized by the beneficiaries of your estate.
More than once I have experienced an instance where an ex-spouse remains on a life insurance policy. The widow and family were shocked to learn that the previous spouse would be inheriting the life insurance, yet the decedent had been married to someone else for over 20 years. And, the ex-spouse was equally shocked when they learned of the sudden windfall. Some people will understand the mistake and try to make things “right” but others will not. The named beneficiary is within their right to receive and retain the policy proceeds.
USE OF A REVOCABLE TRUST
In many instances, a revocable trust is named as a beneficiary. The trust should include provisions to assure your intent is fulfilled without interference from sources beyond your control. For instance – Are you concerned that one of your children may become divorced or has creditors that will end up with the inheritance rather than the inheritance being protected to ensure that it benefits the beneficiary? Is it appropriate to distribute the beneficiaries’ entire inheritance outright to them or is it better to hold the inheritance in trust for the benefit of that beneficiary with someone else managing the money?
Consult an estate planning attorney to discuss your gifting intent and how your intent can be fully realized by the beneficiaries of your estate.
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