Retirement accounts, life insurance and similar items have become an important part of many people's estate plans. In some cases, they are the only estate plan that people have. If you are relying on them, it is important to know a few things about designating beneficiaries.
A good estate plan uses a wide-variety of vehicles to distribute the estate. Today, that normally means that retirement accounts and life insurance are used to help quickly distribute assets to heirs after someone passes away. Because of this importance, you need to know how to go about designating beneficiaries to receive the assets.
A recent article in Morningstar, titled "How to Handle Beneficiary Designations," provides a list of things you should consider, to include:
- Know the basics - It is important to know what documents you can use to designate assets to beneficiaries and know that the assets will automatically pass to the beneficiaries after you pass away.
- Keep Designations Current - You should review your designations regularly and make changes as appropriate.
- Consider Tax Consequences - Your beneficiaries might have to pay taxes on the assets.
- Be Specific - If you want a beneficiary to distribute the assets to other heirs, you need to state how specifically.
- Give special consideration to special needs loved ones - Consider how heirs with special needs will inherit and handle the assets.
- Know about other estate planning tools - You need to know what else you can do to plan your estate.
The list is a good one and the last item is perhaps the most important. You cannot use beneficiary designations in this way for all of your property, so visiting with an estate planning attorney about what else you need in an estate plan is a must.
For more information about how I can help update your beneficiaries using my unique expertise in South Florida as a Certified Public Accountant & a Certified Financial Planner, coupled with my dual specializations from the Florida Bar (Board Certified Attorney in Elder Law and in Wills, Trusts & Estate Law), please visit my website.
Reference: Morningstar (October 10, 2014) "How to Handle Beneficiary Designations"