last will and testament - trust - beneficiaries

What should you know about naming beneficiaries?

Do you have a beneficiaries in your Last Will and Testament, Life Insurance and Retirement Accounts? Here are some important things you need to know.

Beneficiaries of a Last Will and Testament have to wait.

First, you use a Will (Last Will and Testament) to give assets to your beneficiaries, your beneficiaries don’t inherit automatically. Those beneficiaries will need to wait until the probate court process is over before they can inherit. In some cases, this can take many months or even years. If the estate is complex, the legal fees can deplete that inheritance.  If avoiding probate is a top priority, consider a Revocable Living Trust as part of your estate plan.

Go here to learn more about wills and trusts.
Go here to learn more about avoiding probate.

Your Last Will and Testament does not control your retirement plan and life insurance policy benefits. 

Second, assets in a life insurance policy or retirement plan pass to your beneficiaries directly, bypassing your Will (Last Will and Testament).  Your beneficiaries will receive these assets after completing a claim form.

Minor children should not inherit directly. Consider a trust.

Don’t name a minor child as the beneficiary of a life insurance policy or other assets. That is because minor children cannot inherit assets directly. Instead, the wise move is to create a trust to hold these assets for the benefit of a minor child. Name a trustee to oversee the management and distribution of the funds in a way that complies with your wishes.

Go here to learn more about trusts.

Be careful how you name retirement plan beneficiaries.

Unfortunately, most beneficiaries of a retirement plan take the cash immediately, which may not be your intention.  Don’t name your estate as a beneficiary.  That is because that may not allow your spouse or younger beneficiary to take advantage of an IRA rollover or some provisions that could allow your IRA to grow tax-deferred over many years.

If there are multiple beneficiaries, name them.

Finally, if there are multiple beneficiaries for an insurance policy or retirement plan. Don’t make name one person, assuming he/she will distribute to other beneficiaries.  Instead, designate a separate share for each beneficiary.  Does a beneficiary have special needs? If so, create a trust for their share so any inherited assets don’t disqualify them from important government benefits.

Call our office today at (813) 902-3189 to schedule a time for us to talk about an Estate Planning Session.