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Don’t Forget to Check Beneficiary Designations


Check Beneficiary Designations

Designating beneficiaries has to be one of the simplest parts of estate planning. You open a bank account or purchase an insurance policy and fill out the form that asks for a designated beneficiary.

But, according to THV11’s recent post, “The importance of beneficiary designations,” all too often this simple step gets overlooked. Also, circumstances change and then people forget to update their beneficiary designations. Remember that a beneficiary designation is your legal instruction to the entity administering the account as to who gets the money in that account. Check documents—including life insurance, retirement accounts, pensions, bank accounts and investment accounts to make sure that the person named as your beneficiary is still the person you want to receive the assets on your death.

Many name a spouse or a child as a beneficiary but don’t realize that there can be legal issues to consider when making this selection. Also, it’s important to keep these choices up-to-date with changing circumstances.

As an illustration, some folks who have owned life insurance policies for a very long time haven’t looked at their policies in many years. When they review the policies, items of concern often pop up—like an ex-spouse or a dead relative still named as a beneficiary.

Retirement accounts—like IRA accounts, 401(k)s, and 403(b)s—require up-to-date beneficiary designations to be on file with the plan sponsor. With retirement accounts, typically the best primary beneficiary will be your spouse and the secondary beneficiaries will be your children.

However, if you have a trust created as a part of your estate planning strategy, the trust may be a beneficiary of last resort. That’s because there’s a difference in tax treatment of living persons vs. trusts.

Updating your beneficiary is generally a very easy thing to do. The best candidate is a living person, but a qualified charity could be the beneficiary of a retirement account. This is something that you should discuss with an experienced estate planning attorney who will be able to explain how charitable giving can be structured in your estate plan.

Reference: THV11 (July 5, 2016) “The importance of beneficiary designations”

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Two words cannot sum up the entire process of creating my “trust.” I enjoyed your attention to detail, your patience of explaining terms and conditions until I understood, also giving me copies to read and understand. Thank you for your suggestions on what was best for “me” but still allowing me to make my choice. Most of all, thank you for thinking of “me.” Wells Fargo said “you were the best” I cannot deny that. Again thank you very much for everything. Anna is an asset or a compliment to the firm. She is warm and very caring. It was great doing business. Thank you.