Assigning your loved one, a friend, or a charity as the beneficiary of your account is an important aspect of estate planning. The beneficiary of your bank, retirement, or insurance account will be able to access the funds quickly after you pass away without going through the probate process. While beneficiary designations are an effective way to pass your wealth on to your heirs, some challenges can arise with assigning beneficiaries.
Discuss Your Case With a Southeastern Massachusetts Estate Planning Lawyer
Whether you would like to begin the estate planning process, update your estate plan, or discuss an issue with a beneficiary designation, Surprenant & Beneski, PC, is here to help. Our legal team has decades of experience assisting Southeastern Massachusetts clients with a wide range of estate planning matters. We provide comprehensive estate planning services and help our clients meet their estate planning goals. Contact us today to schedule a consultation to discuss your case with one of our experienced estate planning lawyers.
Challenges With Assigning Multiple Beneficiaries
Before submitting a beneficiary designation, it’s wise to discuss your choice with your attorney to determine whether it will produce the results you intend. You can name more than one primary beneficiary to share the proceeds in your account. You will need to specify on the beneficiary designation form what portion of the assets you would like each beneficiary to receive. In most cases, you can express these portions as percentages or as fixed dollar amounts.
Completing beneficiary forms can be complicated, and it’s easy to mistakenly list beneficiaries as a secondary beneficiary instead of a primary beneficiary. Suppose someone would like their two children to split the assets in an account equally. They may write down their first child’s name as the primary beneficiary but list their second child as the secondary beneficiary. In this case, the second child would not inherit anything. If you are concerned about filling out a beneficiary designation form, the lawyers at Surprenant & Beneski, PC, are here to help.
Using Fixed Dollar Amounts Instead of Percentages
If you decide to use a fixed dollar amount, several different issues could occur. For example, someone could designate $50,000 to his son. However, the dollar value of the account typically fluctuates with the stock market. By the time the account owner passes away, the account could be worth double what it was valued at when the owner assigned a beneficiary.
On the contrary, the balance at the time of death could be less than the stipulated dollar amount due to loss on investments and distributions made to meet the RMD requirement. Another option is to leave a specified dollar amount to the first individual and the remainder to the second individual.
Using a percentage is a safer choice, particularly if your account is tied to Investments and the stock market. Additionally, some people assume that they must split the assets in your account equally between two beneficiaries, but this isn’t the case. For example, you can leave 80 percent to one primary beneficiary and 10 percent each to two other primary beneficiaries.
Beneficiary Designations and a Will
The owner of a beneficiary account may appoint a beneficiary of “as per my will,” requesting that the account managers distribute the proceeds according to the guidelines in the will. There are multiple problems with using this type of beneficiary designation. Many custodians of IRA accounts and other retirement accounts will not accept “as per my will” beneficiary designation. The probate court only distributes assets that are part of the individual’s probate estate. Accounts with beneficiary designations are not considered part of a person’s estate because they are not probate assets.
Forgetting to Update a Beneficiary Designation
As a general rule, the terms in a person’s will do not control or overrule a beneficiary designation. For example, suppose a wife leaves everything to her husband in her will. However, she appointed her child from a previous marriage as the beneficiary of her retirement account. She forgot to update her beneficiary account to her husband after she got married. In this case, even though she would have liked her husband to inherit the assets in her retirement account, the beneficiary designation will be the controlling factor, and her child will inherit the assets.
Designating “All My Children” As Beneficiaries
In other cases, an account owner will list “all of my children” as the beneficiaries. In most cases, account managers will abide by this designation, but it could create some challenges. For example, suppose one of the account owner’s children passed away before the account owner. There will be an issue regarding how the deceased child’s share will be processed.
If the account owner wants the child’s share to go to his or her children, the owner needs to make that clear in the beneficiary designation. Otherwise, the deceased child’s share could be split between the other adult children. There is an option for account owners to attach a customized beneficiary designation or to include a “per stripes” clause.
If you have questions regarding how to complete a beneficiary designation form to ensure your assets are distributed according to your wishes, we can help. One of the skilled lawyers at Surprenant & Beneski, PC, can help you take an inventory of your beneficiary accounts and review them to ensure they are complete according to how you like your loved ones to inherit your assets.
Contact An Experienced Southeastern Massachusetts Estate Planning Lawyer
At Surprenant & Beneski, PC, we provide our clients with the one-on-one attention they deserve. We can answer your questions related to designating a beneficiary or being a beneficiary. We can also help you put your comprehensive estate plans in place so your beneficiaries receive everything you would like to leave them. Contact our Southeastern Massachusetts law firm today to schedule your initial consultation and discuss your case with an experienced team member.