Even if you don't already have an estate plan, you have probably thought about how you would want to pass on your property and assets. Turning these wishes into reality requires a careful legal process. How are these steps taken and what should people who want to pass on part of their estate know about their role in the process?
Estate planning should include beneficiary designations
A person named in beneficiary designations will receive assets such as a 401(k), IRA or life insurance. If you want a particular person or persons to receive specific benefits, they should be named in beneficiary designations. Without designations, assets may pass on in accordance with a default contractual agreement or state law.
As the person who will pass on assets, knows as the testator, you have the right to name beneficiaries as you see fit. Beneficiary designations allow you to:
- Allocate different amounts of property to a certain person or persons.
- Name someone other than an immediate family member as a beneficiary.
- Give money to a trust or charity.
Although designations provide flexibility, they should be updated as circumstances change. Major family events that might warrant a review of beneficiary designations include:
- Marriage or divorce involving you, your children or other beneficiaries.
- Birth of a new child, grandchild, cousin, or niece or nephew.
- Conversion or rollover of retirement assets.
Estate planning and beneficiary designations can change
Beneficiary designations can be made with the help of an estate planning attorney. A legal professional will review your assets and help you understand the law as it applies to your situation. Through this process, you may name your beneficiaries as you see fit.
Changes can be made to an estate plan and beneficiary designations until your death or incapacitation as the testator. Any person over the age of 18 can begin outlining an estate plan. An early start to the process no matter your age or family circumstance can provide a clearer vision of succession.
Through beneficiary designations, you can express your wishes for your assets. Outlining an estate plan and beneficiaries may help avoid costly and time-consuming litigation and probate, and, instead, keep the focus on family and the well being of an estate or business.