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Biddle Law Estate Planning Blog

Thursday, July 16, 2020

The Do’s and Don’ts of Beneficiary Designation

When you pass away it’s important that your assets go to the correct recipient(s), as in those whom you designate. But what may be surprising is that despite how important it is for the right person or entity to receive your assets, many people fail to give much thought to their beneficiary designations.

Beneficiary designation is important because your beneficiaries may be entitled to a lot of money. Your beneficiaries will receive proceeds from life insurance, retirement plans and pay-on-death accounts.

In order to assign a beneficiary, you can use a beneficiary designation form since these assets will pass to the individual by contract. These types of assets do not pass per your will or trust. When you don’t properly designate a beneficiary, it can result in these assets going to someone whom you don’t intend to receive them or your family may end up spending a lot of time and money in probate.

Now is as best a time as ever to review your beneficiary forms in order to determine whether any changes are necessary. When looking at these forms keep the following do’s and don’ts of beneficiary designation in mind.

DO’s

1. Specify a beneficiary and at least one contingent beneficiary.

You must understand that beneficiaries are treated differently depending upon type. Therefore charities, organizations, and estates are treated differently than individuals. If you are naming an individual they should be a “designated beneficiary.” Also, it’s important to name at least one more beneficiary should your first predecease you.

Your beneficiary does not need to remain the same once named. As things change, such as getting married, divorced, or having children, you are able to and should consider changing your designated beneficiary – or at least ensure that you are still happy with your choice.

2. Obtain your spouse’s consent.

It’s often assumed that you will leave all of your assets to your spouse. Therefore, you can avoid a lot of confusion and aggravation by speaking with your spouse if you want to name someone other than him or her as a beneficiary.

3. Get the plan administrator to confirm that they have received and accepted the beneficiary form.

It’s important to obtain confirmation that everything is good to go. Therefore, once you receive confirmation from your administrator that they have received and accepted the beneficiary form, you should put that confirmation with your other estate planning documents so that they will remain in a safe place for your estate executor or trustee.

DON’Ts

1. DON’T leave money to minors or incapacitated individuals entirely.

It’s not a good idea to leave either minors or incapacitated individuals your money. This is because until they reach the age of majority they will not be able to receive the funds. A guardian must first be appointed by the court and then must report to the court each year. Since there are other ways to provide minors with funds from your estate, such as through a trust or custodial designation, it’s important to do so.

2. DON’T leave the assets to a trust without first consulting with a qualified estate planning attorney.

Before you leave your assets to a trust, it’s imperative that you speak with a knowledgeable and experienced estate planning attorney. Although there are many reasons why you may wish to leave these assets in a trust, doing so requires specific language and planning - you don’t want to risk doing it incorrectly.

3. DON’T delay the completion of your beneficiary designation.

As with most estate planning documents, you may believe that you have tons of time to complete your beneficiary designation later on. Whether it’s because it seems overwhelming, annoying, or unnecessary, it’s best to complete the forms since we never know what tomorrow will bring.

Biddle Law Can Help with the Creation of a Beneficiary Designation

A qualified estate planning attorney can help to advise you in completing your designated beneficiary forms. It is extremely important that you do so correctly in order to ensure that your new wishes are legally enforceable. A qualified attorney can answer any questions you may have and walk you through the process. At Biddle Law, we care about your future and want to assist in protecting your interests. To learn more or to schedule a consultation, contact us today!


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