One of the most important, but simple, parts of estate planning is designating beneficiaries. We incorporate a review of your beneficiaries to ensure they are up-to-date and reflect how you want a particular investment distributed. We will verify the following:

  1. All retirement accounts have beneficiaries. If you fail to provide them, the custodian of your account’s disclosure document will designate them for you. However, their document may not align with the way you want funds distributed.

  2. Trust accounts do not have beneficiaries with a custodian. Funds will flow to beneficiaries based on what you have stated in your trust document.

  3. Taxable accounts (other than trusts) can have Transfer on Death registrations. Essentially, this is the same as designating a beneficiary, which prevents the account from being brought into probate and distributed directly to your heirs.

  4. Beneficiaries are listed on any life insurance policies or annuities. Naming only your estate will bring those funds into probate. If you name a beneficiary the funds will flow to your heirs directly without probate.

Each scenario above will avoid probate, making the distribution to beneficiaries much easier. Omitting a beneficiary or designating only your estate will trigger probate, making the distribution potentially more lengthy and complicated.

It is important to discuss the above with your attorney to determine whether a trust or individual should be designated; individual circumstances will determine the best route.

Finally, make sure you have contingent beneficiaries designated (in case the primary beneficiary is no longer living) so funds are directed accordingly. Also, be sure to review your beneficiaries every few years to ensure you’re current.

About the Author: Jan Kowal, CFP®

Jan’s passion for helping clients work towards their financial goals began almost 40 years ago. His planning is based on personal relationships and a true understanding of clients and their goals. Jan graduated from George Washington University with a BBA in Accounting and an MBA in Finance and Investments. He has been a Certified Financial Planner since 1984. Jan enjoys music, travel, cooking, and family time.

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