When people in Wheaton think about estate planning, many of them do not consider their assets with beneficiary designations in mind. These assets often prove to be a key component of an estate plan for numerous reasons. Beneficiary designations in Wheaton estate planning are important because they have the ability to reinforce or ruin the operation of a plan.
Whether you already have an estate plan in place or are just starting to create a plan, it is a good idea to make sure your estate planning attorney is aware of assets that could be designated to a beneficiary of some form. In some cases, it may be necessary to change designations to keep from undermining the goals of your plan.
A beneficiary designation is a named person or entity who receives the benefits of an asset when the account holder passes away. Since the asset passes directly to the beneficiary, it does not become part of the deceased person’s estate.
Life insurance policies have always had beneficiary designations since they exist for no other purpose than to pay benefits to someone after the death of the person on the policy. Retirement plans have also commonly had beneficiary designations. One reason for the importance of beneficiary designations in Wheaton estate planning is that now many assets, including annuities, brokerage accounts, and bank accounts, may be subject to a beneficiary designation. Real estate may also be subject to a type of beneficiary designation if it involves a transfer on death provision.
If the majority of an individual’s assets are distributed directly to people through beneficiary designations, the estate may not have enough money left to pay outstanding bills or fund other objectives. Moreover, in some cases, the designated primary or contingent beneficiary may be ineligible to inherit, so it is advisable to establish a trust to serve as beneficiary.
Many times, beneficiary designations complicate Wheaton estate plans because the designations are old. An individual may have established brokerage or retirement account many years earlier designating a sibling, parent, or spouse who may now be estranged, deceased, or divorced. It is vital to ensure that beneficiary designations are up-to-date.
In some cases, it is advantageous to name a trust as the beneficiary, and then the trust beneficiaries may receive benefits. This could allow the ability to accomplish multiple estate planning objectives. At the time an estate plan is created, it is not always obvious how assets are likely to change in value. Having assets transferred to a trust and then distributed according to a percentage of value could allow for a more equitable distribution than might be possible with a straight beneficiary designation.
For an estate plan to be most successful at achieving your objectives, it is critical to consider all potential assets. Ignoring assets subject to beneficiary designation only gives your estate planner part of the picture instead of a full view. A planner may either not know about an asset, or, even worse, assume the asset would become part of the estate when it is actually excluded.
Accordingly, it is wise to confer with your estate planning lawyer about all beneficiary designations in Wheaton estate planning. A few moments of conversation could prevent years of headache in the future.