Keeping Track of Beneficiary Designation Forms

There are many assets such as bank accounts, brokerage accounts, insurance policies, annuities and retirement funds that allow a beneficiary to be named on the account. In the event of the account owner’s death, those funds go directly to the person named, avoiding a lengthy probate waiting period. An article in the Wall Street Journal highlighted the importance of keeping accurate and up-to-date documentation of those who have been named as beneficiaries and the serious issues that can arise if beneficiaries are not updates.

 beneficiariesFor example, it is important to remember that despite who is designated in a will, it’s the person named as the beneficiary on the account, policy, etc., who will receive the funds. It’s all too common for people to forget the beneficiary they named on as beneficiary on accounts opened years ago. Your will may be written so that your entire estate is left to one person, but if someone different is named as beneficiary on your bank accounts,the beneficiary on the accounts will receive the funds, not the person named in your will.

Another common oversight people make is forgetting to update beneficiaries when an event such as a death, marriage, or divorce occurs. Financial experts point out that it’s important to choose a beneficiary when you roll over a 401k or an IRA to a new plan or to a Roth IRA because the person who you had previously designated does not automatically carry over to any new accounts.

Experts also advise against choosing a different beneficiary for multiple accounts. For example, if you have three children and each one is the sole beneficiary on three separate accounts and the accounts experience different rates of growth over the years, there will be an unequal distribution of assets upon your death. It may be advantageous to designate all three children as equal beneficiaries on all three accounts.

Careful consideration should be given before naming a minor child as a beneficiary without a trust in place. If a trust is not in place and a minor child is the beneficiary, the court will appoint a financial guardian over those funds until the child becomes of legal age. In addition, not all young adults of legal age are fiscally mature enough to handle a large sum of money responsibly.

Trusts for disabled children and disabled adult children should be set up as supplemental trusts so as not to interfere with any government assistance these children receive. Keeping your beneficiaries up to date and setting up the most strategic estate plan requires the guidance and knowledge of a DuPage County estate planning attorney.

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