Beneficiary Designations Should Not Be Overlooked

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Beneficiary designations are important to estate planning.

You are checking off your estate planning needs.

You have a last will.

You have a general durable power of attorney for financial matters.

You have an advance health care directive, which includes a health care treatment directive and durable power of attorney for health care decisions.

Are you missing anything?

According to a recent article titled “Are You Read to Deal with Your Beneficiary Forms?,” the answer is yes.

Some assets only pass through beneficiary designations.
Not all assets pass through a will.

You may have overlooked your beneficiary designations.

Why are beneficiary designations important to estate planning?

Certain assets are only passed through beneficiary designations.

These include insurance policies, annuities, retirement accounts, and a few other accounts.

Married persons tend to designate a spouse as the primary beneficiary.

But what about the contingent beneficiary, if that spouse fails to survive?

This gets even more complicated, especially if your children are minors.

If that is the case, then you have several options.

What are they?

First, you could designate your minor children as the contingent beneficiaries.

I would strongly counsel against this move.


Since minor children cannot legally inherit directly until age 18, the local probate court must get involved to select and appoint custodian or conservator to administer the funds until your children respectively turn age 18.

A second option is to designate your “estate” as the primary beneficiary.

If you also have a last will, you solve the appointment of the custodian or conservator issue by nominating that person yourself instead of punting the decision to a judge.

You may create a tax problem, however.

If it is a retirement account, the funds may need to be distributed in five years when the “estate” is the primary beneficiary.

Fortunately, you have a third option.

You can designate a trust to administer and distribute the funds for your minor children.

Warning: before designating any trust (e.g., a “testamentary” trust created under your last will or an inheritance trust created under your revocable living trust) as the beneficiary of retirement funds, make sure you have good reason to do so and the advice of an estate planning attorney.

This not DIY planning you want to entrust to online legal forms, regardless how cheap they are.

Reference: (September 8, 2019) “Are You Read to Deal with Your Beneficiary Forms?”

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