The Importance of Naming Beneficiaries
One of the most overlooked yet important elements of estate planning is the naming of beneficiaries. When opening an IRA, a retirement account at work, or purchasing an insurance policy, the owner (account holder) is asked to name a beneficiary, and most name a spouse or children. It is important to name a beneficiary to prevent property from having to pass through probate, the legal process of settling an estate after death, which can be a long and expensive process. Assigning beneficiaries ensures the owner’s assets are distributed directly to beneficiaries according to his or her wishes. In addition to naming at least one primary beneficiary, it is important to choose a Per Stirpes* designation (a …show more content…
Some employer sponsored retirement plans may have contract provisions designating default beneficiaries that could be inconsistent with an owner’s estate planning goals. Even if an owner’s estate is the beneficiary, the owner should complete a beneficiary designation form.
Distributions from retirement accounts in the case of no named beneficiaries follow these rules:
• 401(k) accounts : If the account holder had not begun receiving distributions before the time of death, the account must be distributed to the estate within five years. If the account holder died after the distributions began, distributions may be made to the estate for the remaining life expectancy of the decedent, per IRS …show more content…
Determining Beneficiaries
It is generally advisable for an owner who would like to name minor children as beneficiaries, whether primary or contingent, to consult an estate planning attorney, set up trusts for the benefit of the minors, then name those trusts as the beneficiaries, rather than naming minor children outright. If a minor inherits assets outright, the court will need to name a guardian to oversee these assets until the child reaches the age of majority (typically 18 or 21, depending on the state). This can be a time consuming process and incur additional costs.
Also, it is generally not advisable to name someone in an older generation as a beneficiary as that increases the chance of that individual predeceasing the owner.
In the case of qualified plans such as an employer sponsored retirement plan, ERISA rules require the account holder to list a spouse as primary beneficiary, unless he or she agrees to waive their claim in writing. If the account holder is not married, any individual, trust entity, and/or charitable organization may be named, as can multiple beneficiaries provided that 100 percent of the total is
One of the most overlooked yet important elements of estate planning is the naming of beneficiaries. When opening an IRA, a retirement account at work, or purchasing an insurance policy, the owner (account holder) is asked to name a beneficiary, and most name a spouse or children. It is important to name a beneficiary to prevent property from having to pass through probate, the legal process of settling an estate after death, which can be a long and expensive process. Assigning beneficiaries ensures the owner’s assets are distributed directly to beneficiaries according to his or her wishes. In addition to naming at least one primary beneficiary, it is important to choose a Per Stirpes* designation (a …show more content…
Some employer sponsored retirement plans may have contract provisions designating default beneficiaries that could be inconsistent with an owner’s estate planning goals. Even if an owner’s estate is the beneficiary, the owner should complete a beneficiary designation form.
Distributions from retirement accounts in the case of no named beneficiaries follow these rules:
• 401(k) accounts : If the account holder had not begun receiving distributions before the time of death, the account must be distributed to the estate within five years. If the account holder died after the distributions began, distributions may be made to the estate for the remaining life expectancy of the decedent, per IRS …show more content…
Determining Beneficiaries
It is generally advisable for an owner who would like to name minor children as beneficiaries, whether primary or contingent, to consult an estate planning attorney, set up trusts for the benefit of the minors, then name those trusts as the beneficiaries, rather than naming minor children outright. If a minor inherits assets outright, the court will need to name a guardian to oversee these assets until the child reaches the age of majority (typically 18 or 21, depending on the state). This can be a time consuming process and incur additional costs.
Also, it is generally not advisable to name someone in an older generation as a beneficiary as that increases the chance of that individual predeceasing the owner.
In the case of qualified plans such as an employer sponsored retirement plan, ERISA rules require the account holder to list a spouse as primary beneficiary, unless he or she agrees to waive their claim in writing. If the account holder is not married, any individual, trust entity, and/or charitable organization may be named, as can multiple beneficiaries provided that 100 percent of the total is