New York Estate Planning & Elder Law Blog
Many people who have engaged in estate planning understand that beneficiary designations play an invaluable. Despite this, the value of beneficiary designations is overlooked by some people. After signing estate planning documents, it is critical to make sure that your beneficiary designations are consistent with the rest of your estate plan. Otherwise, the possibility arises that the intent expressed in your will or other estate planning tools might override beneficiary designations.
The purpose of this article is to review some of the other critical issues that everyone should consider when it comes to beneficiary designations and the potential complications that can arise.
# 1 – Be Wary of Naming Spouses as Beneficiaries
Many people want to name a spouse as a primary beneficiary of a retirement account or life insurance policy. Doing so, however, can destroy other estate planning goals. For example, naming a spouse as a beneficiary might interfere with children from a previous marriage or interrupt a desire to not have a spouse control any assets.
# 2 – Do Not Change Things at the Last Minute
Some people change beneficiary designations shortly before they die or become incapacitated because they are nervous about how assets will be transferred. A person’s nerves, however, might dissuade them from achieving what they ultimately want.
Additionally, many times when people make last-minute beneficiary designations, they fail to take complex issues like tax repercussions into consideration.
# 3 – Exercise Caution with Qualified Accounts
It is important to not name a trust as the beneficiary of a qualified account like an IRA account without first speaking with an estate planning lawyer. This is because doing so creates many complex issues including income tax issues.
# 4 – Be Specific
Whenever changing beneficiaries on retirement accounts, it is an absolute must to make sure that details about the revisions are correct. This holds true whether the beneficiary is an individual or a trust. If you guess on these details, you risk your intended beneficiary not ever receiving the desired amount.
# 5 – Protect Taxes
If you have established a trust to reduce the amount of estate taxes paid, it is important to make sure that assets properly transfer into the trust. Appointing an individual as a beneficiary rather than a trust can complicate the purpose of estate tax planning.
If there are not sufficient assets in a trust, the estate tax provisions might not end up applying which means that your heirs might end up paying more in taxes.
# 6 – Understand the Importance of Cash
If a will directly leaves gifts of cash to specific individuals or organizations, it is important to make sure that a sufficient amount of assets come into your estate so your executor can pay out these gifts.
Speak with an Experienced Estate Planning Lawyer
Creating an estate plan is difficult. That’s why you should make sure that your beneficiary designations as well as all other parts of your estate plan work.
If you need the assistance of an experienced estate planning attorney, do not hesitate to contact Ettinger Estate Planning today.