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Wednesday, April 1, 2020

Beneficiary Form Check-Up

Beneficiary designation forms are a crucial piece of your estate planning. Designating  beneficiaries on accounts allows you to plan for distribution of your assets to specific individuals, or to your Trust, by allowing you to choose the people or entities you want to receive the asset when you die.  Retirement plans like 401(K) plans, IRAs, etc. pass by beneficiary designation, as do life insurance policies.  But even regular bank accounts and investment accounts often come with the option to designate a beneficiary.  These accounts may pass by “pay-on-death” (“POD”) or “transfer-on-death” (TOD) designations.

One advantage of having a designated beneficiary on an account is that it becomes a “non-probate asset,” meaning that it passes directly to the beneficiary as soon as a death certificate is received by the institution.  No Court or Trustee involvement is required.  Another advantage is that it may allow a Trustmaker to designate his or her Trust as the beneficiary of the account, funneling the account funds through the carefully drafted estate plan once the Trustmaker passes away.

When your children were minors, you may have named your Trust as the beneficiary of your retirement plans.  If they are now adults, it may be more efficient to name them as the individual beneficiaries of these accounts.  There are many reasons why it is important to review your beneficiary designations on a regular basis.  This is why asset tracking is such an important part of the Generations program—it is a reminder to review the named beneficiaries of your assets and update, if appropriate.

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