Some people automatically put down their children or nieces and nephews, and then fail to consider the substantial estate and income tax consequences that each beneficiary may have from your generosity.
The Cape May County Herald, in “Naming Beneficiaries: What You Need to Know,” advises that it’s important to know that beneficiary designations supersede a will. Designating your beneficiaries is critical, but you also should talk with an experienced estate planning attorney to be certain that your beneficiary arrangements are consistent with other estate planning documents.
There are several different financial products and investments that allow you to name a beneficiary, but each of them may have some subtle nuances that can be hard to flesh out and understand.
Remember that designating a beneficiary is also a legal arrangement. A beneficiary designation requires that you include certain language to be certain that your wishes are accurately recorded and carried out. That is why it is important to consult with a qualified estate planning attorney when deciding who to name as beneficiaries and how to properly document your wishes. In addition to the specific person you’ll name as your beneficiary, you should consider the following:
- The age of the beneficiary, because most policies and plans won’t directly transfer assets to minors, until a court approves a trustee or guardian;
- The ability of a beneficiary to manage assets, because if he or she has trouble with finances, a trust in the person’s name may be a better option than a direct transfer; and
- When looking at your pension plan, the law requires a spouse to be the primary beneficiary of the account, unless he or she waives this designation in writing.
Go with a Pro. Naming beneficiaries is not a simple matter. It requires some real planning and thought to be sure that your decisions are consistent with your financial and estate planning goals.
An experienced estate planning attorney will help you to review your beneficiary designations and suggest options that are appropriate for your situation.
Reference: Cape May County (NJ) Herald (March 17, 2017) “Naming Beneficiaries: What You Need to Know”
We would be happy to sit down with you to help you plan out your beneficiary designations. Contact our office at 801.438.7120 to set up a free consultation.