Considerations When Choosing Beneficiaries

Beneficiaries are a crucial part of your estate plan. They are the people or organizations that will ultimately benefit from your estate when you pass away. Your beneficiaries can receive money or anything else you pass down to them, such as Social Security disability, savings and checking accounts, life insurance policies, retirement plans, and property.

Some beneficiaries are named directly in policies or plans, while others are listed in your will or trust. Choosing a beneficiary is a personal decision, and if you have complex family dynamics, it might not be straightforward. Deciding who should be your beneficiaries can be daunting.

Here are some points to consider:

Beneficiaries are usually family members and friends who rely on you for financial support.
Benefits cannot be paid to someone under the age of 18. If you want to provide for a minor, create a trust and name a trustee to manage the account until the child reaches a specific age.
If you worry that a beneficiary cannot responsibly manage money, you can establish a trust and trustee to invest and disburse funds on the beneficiary’s behalf.
You can name a secondary beneficiary if your first beneficiary dies.
Benefits generally go to your spouse first, then your children, parents, siblings, and then your estate. Make your beneficiary information thorough so that your wishes are clear to your beneficiaries.
If one of your beneficiary’s is currently receiving government assistance, be sure to leave any inheritance for them in a special needs or supplemental needs trust, so as not to make them ineligible to receive government assistance. You can establish this type of trust to channel your assets or insurance death benefit without triggering laws that could mean a significant loss in financial support for the individual.
Many people name charities or other cause-related organizations as beneficiaries. If you support a nonprofit you feel passionate about, you can name it as a primary or contingent beneficiary to receive all or a percentage of your assets. Doing so can be an impactful way to leave a legacy.

Certain accounts, such as pension plans, retirement accounts, and life insurance, require you to name a beneficiary. When you pass away, proceeds from these accounts usually go directly to beneficiaries, bypassing probate, the slow legal process of distributing your assets. By naming beneficiaries for these types of accounts, you will be helping your beneficiaries avoid red tape. Probate means that a court decides how to distribute your funds, leading to delays, confusion, court fees, taxes, and payments that reduce the amount your family receives.

Keep your beneficiaries up to date as your life changes. Major life events are good times to re-evaluate beneficiaries and consider if you want to change how your wealth is distributed. Writing your estate plan is a great way to ensure that those you will one day leave behind are protected. It is essential to consult with an experienced Estate attorney to ensure wishes are carried out.

Do you have questions?

Count on your experienced team at Ericson, Scalise & Mangan, PC to provide you with sound guidance for your Estate Planning, Elder Law, Real Estate, Probate, Trust & Estate Administration, and other legal needs. For assistance, contact us today at (860) 229-0369, or email us at info@esmlaw.com.