Beneficiary Forms and Estate Planning

Understanding the different aspects of estate planning is a crucial part of creating a comprehensive estate plan that accomplishes your individual goals. For probate assets, many individuals utilize a Last will and Testament to direct the distribution of assets subject to probate. Non-probate assets, such as life insurance policies and assets held within a trust, are distributed upon death according to the mechanism for distribution contained within the asset and are usually directed by the nomination of a beneficiary. It is extremely important to remember beneficiary nominations when creating, reviewing, and revising your estate plan.

Common Beneficiary Pitfalls

One common beneficiary pitfall occurs with assets like bank accounts that often have a payable on death beneficiary option. With these options, a bank is directed to distribute assets within the account covered by that designation to the person listed as the payable on death beneficiary. This can cause unintended problems if your Last Will and Testament directs your bank assets to be distributed differently, and may result in an unintended Will contest that could jeopardize other aspects of your Will. Making sure that beneficiaries for these types of assets are properly aligned with other provisions of your estate planning documents is an important part of ensuring your wishes are carried out.

Similarly, many people have retirement plans and other assets through their employment. When such assets are created, you will likely need to nominate a beneficiary. After some time has passed, if you decide to create a trust or other mechanism to distribute your non-probate assets, even careful planning might not allow your assets to be distributed according to your wishes if you do not take time to modify related beneficiary nominations. For instance, if you decide to place such assets into a trust, you will need to update your beneficiary form to indicate that your trust should receive these types of assets in case of your death. Otherwise, they may end up being distributed directly to the original beneficiary. If that original beneficiary has also passed on, as is often the case for accounts opened at a young age where you may have listed a parent as your beneficiary, then the asset may be subject to distribution based on state statute. This can cause a lot of your estate to be eaten up by taxes and other costs, and may differ from your wishes.

Avoiding Beneficiary Pitfalls

Births, deaths, divorce, and other significant life events can affect your estate planning goals. Whenever a significant event occurs that warrants a review and possible revision of your estate planning documents, make sure that you include reviewing and, if needed, updating beneficiary nomination forms so that they accurately reflect your wishes. An experienced estate planning attorney can not only help you create your comprehensive estate plan, but can also keep you updated when laws change that can have an impact on your estate planning. They can also work with you on estate planning revisions to make sure that you do not overlook important details, such as updating all of your beneficiary nomination forms.

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