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How to avoid mistakes concerning beneficiary designations

On Behalf of | Feb 27, 2018 | Uncategorized

One of the objectives in reviewing your estate plan is to make sure the beneficiary designations for all your assets are current and correct.

The way you hold your assets will be important in determining which, if any, will be subject to probate when you pass away.

Start with the basics

Certain assets will indeed go through probate. For example, any asset that bears your name alone, with no beneficiary assigned, will be headed for probate. In addition, if you designate your estate as the beneficiary on any asset, that asset will go through probate as well.

Avoiding probate

There are certain ways to ensure that an asset does not go through the probate process:

  • The POD designation: If you name a POD or “payable on death” beneficiary on your bank account, that individual will receive the funds directly upon your demise.
  • The TOD designation: Similarly, you can name a TOD or “transfer on death” beneficiary on real property or on your investment accounts.
  • Policies and retirement accounts: A beneficiary named on your life insurance policy or on any retirement accounts you have will receive those assets directly upon your death.
  • Joint tenancy: The title to an asset you hold in joint tenancy will not have to go through probate. It will pass to the surviving owner upon your death.

Limiting problems

Remember to designate contingent beneficiaries in addition to primary beneficiaries. Your inclination might be to name your spouse as a primary beneficiary of a particular asset, but you should consider naming another person who waits in the wings in case your spouse predeceases you. Remember that in some instances, your beneficiaries will face tax issues, some of which are associated with probate avoidance strategies.