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Articles: Don’t Hesitate to Designate

It is important to take time to figure out the beneficiaries of retirement plans, life insurance policies and other assets. Here are seven suggestions to consider.

1. Do not leave the beneficiary lines blank. If you don’t name specific beneficiaries of your accounts, or if you name your estate as the beneficiary, your heirs will likely end up in probate court. This can be both time consuming and costly.  If assets go to your estate, they are subject to the reach of creditors.  A better option is to choose individual beneficiaries and list them on the forms.

2. Use trusts for beneficiaries who are minors.
In some states, minors face restrictions until they turn age 18 or 21.  If you designate a minor as a beneficiary, a court will appoint a guardian to manage the funds until the child reaches the age of majority.  Alternatively, you might establish a trust to handle the funds and name the trust as the beneficiary.  Thus you maintain control now and provide asset protection for minors when you are gone.

3. Understand the key rules.   Other than your spouse, beneficiary designations on retirement accounts and insurance contracts will override your will.  If you want someone besides your spouse to inherit assets, your spouse must sign a written waiver.  Without the waiver, a non-spouse beneficiary designation will be invalid upon your death.

4. Inform your beneficiaries. Do not keep your designations a secret. Let your beneficiaries know where to find important documents and contact information for your professional advisors.  On the other end, make sure your advisors have the vital contact information for those sources.

5. Double-check names and numbers.  Make sure names are spelled correctly and that figures are accurate. This is particularly  important  when  listing  Social Security numbers, telephone numbers and addresses.

6. Use percentages instead of dollar amounts. For example, suppose you have an IRA worth $100,000, and you designate a niece as beneficiary of $75,000 of that amount.  If the IRA drops in value to $75,000 or below at your death, your niece gets the entire amount any remaining beneficiaries receive zero. Perhaps a better way to meet your objectives is to give your niece 75% of the overall account value; that provides protection if the value increases or decreases.

7. Name contingent beneficiaries. If your primary beneficiary has died and you have not named a replacement, the assets will go to your contingent or (“secondary”) beneficiaries.  Without a contingent beneficiary, the assets are transferred to your estate (see point #1). Avoid potential problems by indicating contingent beneficiaries as appropriate.

Finally, don’t stuff all the paperwork in a desk or drawer somewhere and forget about it.  Review your beneficiary designations periodically to ensure that they remain up-to-date.  When warranted, have documents revised to reflect your latest intentions.

This newsletter/advertisement is produced for our clients, friends and associates through an arrangement with WPI Communications, Inc. for the representatives’ use. Although the editorial content is professionally researched, written and edited, neither our firm nor any of its agents, representatives or associates make any representations regarding the accuracy of the content or its applicability to your situation. The information in this communication is not intended as tax or legal advice. In accordance with IRS Circular 230, the information provided herein may not be relied on for purposes of avoiding any federal tax penalties. Any tax advice contained in the body of this material was not intended or written to be used, and cannot be used, by the recipient for the purpose of 1) avoiding penalties that may be imposed under the Internal Revenue Code or applicable state or local tax law provisions, or 2) promoting, marketing or recommending to another party any transaction or matter addressed herein. You are encouraged to seek tax or legal advice from an independent advisor.


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