New York Estate Planning & Elder Law Blog
Many of us don’t keep our assets in tangible items. Instead, many people’s assets are retirement accounts including 401(k)s, IRAs, and worker benefit plans.
One way in which retirement accounts differ from more tangible assets is that wills do not dictate how individual accounts are disposed. As a result, it is vital to make sure that beneficiary designations on individual retirement accounts are properly updated.
After all, there are a number of events including births and deaths, which can greatly impact a person’s estate plans.
# 1 – Retirement Accounts Are Not Part of the Probate Process
Retirement accounts are distributed in accordance with beneficiary designations. As a result, these accounts do not proceed through the probate process, which is a court administered process.
In many cases, wills only apply to probated assets instead of everything that a person owns. While you might think that making sure that your will is properly written is enough, it is also critical to review beneficiary designations.
# 2 – Beneficiary Designations Can Easily Become Outdated
Beneficiary designations frequently become “stale” as a result of time that passes or the occurrence of a number of different types of life events.
Forgetting to remove a beneficiary that has passed away or that you have divorced can result in a number of undesirable consequences. As a result, it is important to review beneficiary designations once every few years.
# 3 – Making Adequate Beneficiary Revisions is Less Expensive
It often costs much more to create a new will than it does to update beneficiary designations.
As a result, even if it is possible to make these changes about asset distribution in a will, it is much more affordable to simply fill out a new beneficiary form.
# 4 – Tax Advantages
Many people overlook the fact that it can result in substantial tax deductions if a person properly lists beneficiaries on a policy. This is because on retirement accounts, beneficiaries are able to continue deferring taxes through required minimum distributions based on the inherited owner’s life expectancy.
Consequently, it is possible to save a great deal of money by naming beneficiaries.
# 5 – Beneficiary Designations Offer Privacy
Wills that are probated become part of the public record. This means that it will later be possible to learn how assets in a will were distributed even if a person is not part of the deceased individual’s immediate family.
Beneficiary designations, however, allow a person to divide assets while maintaining secrecy. As a result, by making sure that beneficiary designations are kept up to date, it is possible to maintain privacy.
Speak with an Experienced Estate Planning Lawyer
It is critical to avoid the misconception that one estate planning document is able to control a number of different assets. Instead, if you own a retirement account, it is important to make sure these beneficiary designations are adequately updated.
An estate planning lawyer can help you resolve a number of other issues that arise. Contact Ettinger Estate Planning today to schedule a free initial consultation.