Did you know beneficiary designations are an important part of estate planning? Probate is the legal process of distributing your estate after death to your heirs. Involvement with probate court can be lengthy and costly, so people often attempt to place as much of their wealth as possible in non-probate assets. In general, assets in your own name without a beneficiary designation become probate assets, and assets with a beneficiary designation become non-probate assets. Joint assets in two or more names with right of survivorship are not probate assets. Assets in a Revocable Trust usually avoid probate.
Keeping beneficiary designations for your non-probate assets up to date is crucial to your estate plan. Not only can you exempt those assets from the probate process, but you can choose the people whom you want to receive specific assets from your estate. Periodically reviewing and updating your beneficiary designations, if needed, can ensure that your estate is distributed in the manner you choose. Consult a Boca Raton estate planning attorney at Kramer Green for more information and advice about creating and maintaining your estate plan.
Assets with Beneficiary Designations
When you own an asset with a beneficiary designation, the proceeds of the asset go directly to your beneficiary or beneficiaries at the time of death. Choosing a beneficiary for your assets is a quick way to deliver the assets to your loved ones following your death.
Common types of assets with beneficiary designations include life insurance policies, IRAs, 401(k) plans, other types of retirement accounts, and bank accounts. You can designate one or more beneficiaries for each account. If you choose more than one beneficiary, you also can decide what percentage of the account proceeds go to each beneficiary. Your designated beneficiaries can withdraw or transfer the funds from those accounts upon proof of your death. Likewise, a life insurance policy will pay out to your designated beneficiaries when you pass away.
Updating Your Beneficiary Designations
Regularly reviewing and making any desired changes to the beneficiaries listed on your bank accounts, retirement accounts, investment accounts, and life insurance policies can be crucial. For instance, you may have opened a bank account or IRA as a young adult before you marry or have children. Therefore, reviewing your beneficiary designations along with major life changes such as marriage, divorce, birth of a child, or adoption is always a good idea.
Death of a loved one is another good reason to review your beneficiary designations. For example, you might have named your parents as your life insurance policy beneficiaries when you started your first job. However, you are likely to outlive your parents. You must remove a deceased person as the beneficiary of your life insurance policy and substitute a living heir who you want to receive the life insurance proceeds, whether it be your spouse, your child, or someone else.
Likewise, if your spouse predeceases you or you get divorced, you must remove their name as your beneficiary on these assets. Otherwise, you may leave the account with no beneficiary since the only designated beneficiary is deceased or a person to whom you are no longer married. Leaving an account without a beneficiary designation could result in messy, lengthy legal disputes in probate court, which can be difficult and expensive.
Most life insurance policies and retirement accounts allow you to designate a secondary beneficiary to the account. Including a secondary beneficiary provides an extra layer of protection in case your first designated beneficiary passes away before you.
Look to Kramer Green for Advice about Your Estate Plan
Consulting an attorney to help you with your estate plan, including designating beneficiaries, is the best way to ensure your wishes are fulfilled. A Fort Lauderdale estate planning lawyer at Kramer, Green, Zuckerman, Greene & Buchsbaum, P.A. can assist you with all aspects of your estate plan, including life insurance policies and accounts that need designated beneficiaries. We know how to structure your will and estate plan to help avoid probate, preserve your assets, and make legal matters less complicated for your family.
We are here to guide you through the complex legal estate planning process. Contact our office today at (954) 966-2112 or online to schedule a time to discuss drafting a will and related estate planning issues with our Aventura estate planning attorney.