The Importance of Beneficiary Designations, What Your Will May or May Not Control

Writing a Last Will and Testament is the foundation of your estate plan.  Durable Power of Attorney and Healthcare Power of Attorney are two other important pieces to the plan, but these three may not include everything you need. Estate plans can be as customized as a client needs or wants.

A word of caution – when designing your estate plan, don’t overlook the fact that some of your assets may not be covered by the provisions of your will.  You will need to work through these details with your estate planning attorney, tax accountant and financial advisor.

Assets that are not typically affected by wills include:

  • Life Insurance
  • Annuities (which are a form of life insurance)

  • Retirement Plans or Pensions

  • Individual Retirement Accounts (IRAs)

Questions From Our Clients

We recommend a review of beneficiary designations and estate plans annually and after any major life event occurs including; marriage, divorce, birth or adoption of a child, death of a loved one, or a change in employment and financial status.

The loss of a family member is a very emotional time. All families have challenges and sometimes, these issues spill over into the planning and settling of an estate. There are things you can do to make the arrangement you intend more likely to be upheld once you are gone:

  • Ensure your will is properly executed by working with an experienced attorney.
  • Consider your family dynamics during the planning process and share any out of the ordinary circumstances with your attorney as these may be addressed within the legal documents.
  • State your wishes to family while you are still alive.
  • Video record the signing. A video recording of the will signing allows your family members and the court to see that you are freely signing the will and makes it more difficult to argue that you did not have the mental capacity to agree to the will.

A power of attorney and a guardianship are tools that help someone act on your behalf should you become incapacitated. With a power of attorney, you chose who you want to act for you. In a guardianship, the court decides who will act as guardian.

Trusts can have many attributes – they are flexible, varied and can be complex. Each type of trust has advantages and disadvantages, which you should discuss thoroughly with your estate planning attorney before establishing one.

Some of the advantages of trusts are they:

  • Put conditions on how and when your assets are distributed after you die.
  • Reduce estate and gift taxes.
  • Distribute assets to your heirs efficiently without the cost, delay and publicity of probate court. Probate can cost 5% or more of your estate.
  • Better protect your assets from creditors and lawsuits.
  • Name a successor trustee, who not only manages your trust after you die, but is empowered to manage the trust assets if you become unable to do so.

Short answer is yes. These two estate planning documents, more commonly associated with older folks, are essential for younger people too. Without them, parents don’t have the authority to make health care decisions or manage money for their kids once they turn 18—even if they are paying the tuition, still have those kids on their health insurance plans and claim them as dependents on their tax returns.

If you would like us to feature a topic or answer a question in future issues, email your suggestion or question to [email protected].

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