Naming your beneficiaries, the people or charities who you want to receive your assets, is extremely important, even if you have a small estate. Once you’ve chosen who you want to receive your assets either from a will, trust or life insurance policy, the way you designate how they inherit should be a key consideration.
We’re outlining a few important factors to be considered, and avoided when naming your beneficiaries.
Beneficiaries Will Have To Wait
Any assets you leave to a beneficiary via a traditional will have to wait for their money or property until the probate process has been completed, which can take months or even years to be completed.
If you want to make the process quicker for your beneficiaries, consider creating a Living Trust as a part of your estate plan.
Minor Children Should Not Inherit Directly
According to Bridge Law, “Naming a minor child as the beneficiary of a life insurance policy or other assets is never recommended. If you fail to name a guardian, the state could take over the assets and name someone to manage those assets on the child’s behalf. This can result in additional expenses that would eat into that inheritance, and those assets may not be managed according to your wishes. Instead, the wise move is to create a trust to hold these assets for the benefit of a minor child and name a successor trustee to oversee the management and distribution of the funds in a way that complies with your wishes.”
Name All Beneficiaries
If there are multiple beneficiaries for an insurance policy or retirement plan, don’t make the mistake of naming just one person, like the oldest child, and assume they will make the proper distributions. Instead, create a separate share for each beneficiary.
It’s important to note that stepchildren arent beneficiaries unless they are specifically named in your will or other estate documents. Naming each person individually instead of saying “children” or “grandchildren” will eliminate any potential confusion.
Name Contingent Beneficiaries
Contingent beneficiaries are people, charities or other entities who inherit only if the primary named beneficiaries have passed while your estate is going through probate, if they’ve predeceased you, or if the charity no longer exists.
Naming your contingent beneficiaries is wise, even for your spouse as you truly cannot prepare for every situation. Think of it as having proper back-ups in place, that way, your estate will be prevented from potentially going to the wrong people.
If you are divorced, make sure to update beneficiaries on any retirement plans you may have, like your 401K, and any life insurance policies you may have.
We encourage you to take the time to think about your beneficiaries, and sit down with an expert who can help you get all of your ducks in a row. For more information, or help getting started naming your beneficiaries, give the Corwin-Rey team a call at 360-414-8754.