Estate planning plays a pivotal role in protecting your loved ones and your legacy. While some
may think a beneficiary is only important where a Will is involved – did you know you should
also be naming beneficiaries on your bank accounts? If you didn’t, here are some vital facts
about beneficiaries that you should know.
First, a beneficiary is any individual or entity to whom you wish to bestow your assets.
Beneficiaries are an integral part of estate planning as having them determines whether or not
your assets are left in limbo. If you don’t name a beneficiary for important assets such as life
insurance policies, retirement plans, and bank accounts, then your heirs and loved ones will have
to go through the costly probate court process to get whatever remains of your assets after court
fees.
Even if you name a beneficiary for all of your accounts, there are situations in which that
beneficiary cannot get your assets. This happens when the beneficiary is a minor child, in which
case the surviving spouse or guardian will have to file a conservatorship with the probate court to
access the funds. However, none of the funds can be used without a court order until the
minor reaches the age of 18, and the surviving spouse or guardian will have to file annual reports
on the maintenance of the funds, which is a tiring, costly, and time-consuming process. On top of
that, if the beneficiary is disabled, then leaving your assets to them outright can result in that
beneficiary losing his or her government benefits.
However, if your beneficiary designation is a Trust, rather than an individual, then you avoid the
probate process entirely. Keep in mind, though, that your Trust must be tailored to the specific
assets you want to protect. A Trust set up to protect a life insurance policy will be different from
one set up for a retirement account. For that reason, it’s recommended that you seek out the
advice of a local estate planning attorney to know your best options.
