One of the most critical parts of any estate plan is choosing beneficiaries, but it’s one that often goes overlooked. If beneficiary designations for insurance policies and retirement accounts don’t match your estate plan, it could undermine the intent of your will or trust.
Some who want to avoid probate may also name beneficiaries for bank and brokerage accounts, so the proceeds are paid out on the death of the owner. However, doing so may negate other careful planning for executing a will or funding a trust.
Issues to consider when naming beneficiaries
While the advice of an estate planning attorney here in Georgia is the best way to avoid making mistakes, here are some issues to consider when choosing beneficiaries:
- Cash: If you plan to leave money to family, friends or charities, make sure you have enough in the estate to cover all payments.
- Tax liability: If life insurance or other benefits are distributed to beneficiaries not named in a will, ensure that the executor has enough cash to pay estate taxes that will be due after your death.
- Protect tax advantages: Trusts are often created for tax benefits, so place enough funds in the trust to maximize tax savings. Naming people as beneficiaries instead of your trust can defeat the plan’s purpose.
- Check for errors: Know whether your trust is revocable or irrevocable and verify that all information on a change of beneficiary form is correct, such as trust name, trustee information and the tax ID number.
- Reconsider choosing a spouse: Many people choose their spouse as primary beneficiary on a life insurance policy and name their trust as the secondary beneficiary. Doing so could jeopardize your estate planning, especially if children from a first marriage are involved or you don’t want your spouse to control the funds.
Seek legal advice for estate planning success
You have worked hard to not only be successful, but to make sure your assets are distributed according to your wishes. An experienced estate planning attorney here in Georgia can answer all your questions about beneficiary designations and how to make sure they fit your plan.