Hyden, Miron & Foster, PLLC Law Blog

Friday, June 21, 2019

What to Know When Designating Beneficiaries

The act of designating beneficiaries to receive your assets upon your death is a smart way to avoid the probate process for a number of different assets including bank accounts, life insurance policies, real estate, and retirement plans. By doing so, the designated asset goes straight to the person or charity that you had assigned and avoids probate. While this is an extremely helpful way of distributing your property, there are still things that you should and should not do when you are naming your beneficiaries.

DO let your beneficiaries know what you are planning to gift them or leave that information clearly in an easily accessed location. It is important that the beneficiary know that he or she is such, as when they do not know that they have been designated as a beneficiary the money may remain unclaimed. This clear designation also enables the custodian of the asset to speak with the correct individual. 

DO NOT name a recipient of government aid as a beneficiary, as this could jeopardize their government benefits and health insurance. 

DO be sure to keep your designations updated. As life progresses, relationships change. That is why it is so important to review your beneficiaries on a regular basis – especially after the occurrence of a life-changing event such as a birth, marriage, or death. Additionally, when a bank or provider changes ownership, it is important to review everything, as sometimes beneficiaries do not automatically transfer along with the ownership. 

DO NOT name children under the age of 18 as a beneficiary since they cannot legally own property. If you wish for a child under the age of 18 to be the beneficiary of any property, you must also be sure to set up a guardianship for that child. 

DO ensure that the beneficiaries who you designate also coordinate with your estate plan. It is important that these beneficiaries correspond accurately with your objectives. You must keep in mind those beneficiary designations override gifts that have been made in your will. Be sure that everything is aligned. 

DO NOT name someone as a beneficiary in the hopes that they will distribute the money to others according to your wishes. There is nothing that assures that the money will be distributed as you wish, and the gifting of the money may also have tax implications for the beneficiary. 

DO have a contingent beneficiary named in case the primary beneficiary is no longer around or unable to collect. 

DO NOT simply assume that what you want has been filed with your funds, banks, or insurance companies. Instead, make sure that you have written confirmation from each regarding your named beneficiary. 

Remember that trusts are more flexible than beneficiary designations are. However, they are a nice alternative to a trust under certain circumstances. 

If you are looking to designate beneficiaries to your will, we can help to ensure that everything is done correctly. Call us today to schedule an appointment!

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