Protect Your Loved Ones

Protect Your Loved Ones

December 23, 2020

Protect Your Loved Ones.

Why Beneficiary Planning is so important.

Did you know that beneficiary forms trump your will?

Even if you have completed a will, if the beneficiary form takes precedence and is followed even if it counters what is said in the will.

The will covers assets that do not have beneficiaries. Assets (e.g. your home) that are covered by the will need to go through a process called probate which enables you to switch the title of that asset to the beneficiaries of the will. Assets that pass through the will are not immediately accessible to the heirs as they need to go through probate.

Beneficiary forms are completed for work retirement plans, IRAs, Annuities and Life Insurance policies.  For work retirement plans, your spouse is automatically your beneficiary. If you are married and want to leave your 401k to someone else, your spouse needs to sign a spousal waiver form.  Depending on the state that you live in, your IRA can be left to a non-spouse beneficiary and there is no spousal waiver form required. Beneficiaries receive the money outright.

By updating your account to a Payable/Transfer on Death account, you can turn a regular taxable account that would be covered by the will into an account that will automatically be paid out to the beneficiary on the account. If you are working with attorneys and have an estate plan, you will want to check with your advisors to make sure your beneficiary designations do not undermine your overall estate plan.

Since beneficiaries get money outright, it is important that they are able to handle the money. Special needs folks and minors pose more complicated estate planning issues. Leaving money to individuals with special needs can present problems with the governmental benefits that they may be receiving and you will want to consult a special needs specialist to better understand the ramifications.

Leaving money to minor children can present a challenge as they are not able to own assets outright.  They will need to have an adult custodian to hold the assets.

Review your estate plan and your beneficiaries. Updating beneficiary forms is critical for ensuring that your loved ones get the money that you want them to have. You will also want to name contingent beneficiaries on your accounts just in case the primary beneficiaries pass away before you.


The opinions voiced are for general information only and are not intended to provide specific advice or recommendations for any individual. This information is not intended to be a substitute for individualized legal advice. Please consult your legal advisor regarding your specific situation.