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Are Your Documents Following the Same Script? Basics of Beneficiary Forms and Estate Planning

Before I begin, Happy Birthday to my first love, my beautiful and wonderful mom, Iris Newman! Love you with all my heart and soul! Keep doing what you are doing. We want you here for many many more years to come! Now, there is no good segue, so I will just begin.


In the event of your untimely death, the manner in which your beneficiaries--or those people who receive your assets from your estate--are determined is highly dependent on how your property is titled.

Generally, property with title includes vehicles, boats, real estate, bank accounts, savings bonds, life insurance policies, retirement accounts, and stock certificates. If you die without a will or a trust and have not used any beneficiary or transfer on death options, state law will determine who inherits property with a title. On the other hand, property without a title, such as jewelry, antiques, art, and even your digital assets are usually provided for in your will or trust, and if you do not have one typically goes to your heirs at law. As you can see, who you have listed as a beneficiary--and not having a beneficiary designation at all--can have serious implications for your family after you have passed away.

Increasingly, a wide range of financial products allow you to name a beneficiary upon your passing. The benefit of naming a beneficiary is that the assets go directly to the named beneficiary upon the account owner’s passing, often bypassing the long and expensive process of probate. The danger, however, is when these designations are not carefully coordinated with your estate plan you can inadvertently disinherit a loved one, cause a disabled family member to lose government benefits, leave your heirs with a massive tax bill, or otherwise fail to achieve your goals.

What is a Beneficiary Designation?

Simply put, a beneficiary designation is a contractual agreement where the bank, insurance company, or financial company agrees to pay a person or entity, that you have selected, the specific assets upon your death. For example, Dave may list Susan, his sister, as the payable on death (POD) beneficiary for his savings account at ABC Bank. When Dave dies, ABC Bank will pay Susan the balance in Dave’s account, without Susan having to first go to probate court.

But properly choosing a beneficiary and making sure it falls in line with your estate plan is often more complex than it seems at first glance. Regardless of what anyone tells you, completing a beneficiary designation form is not just a routine task you complete when filling out your bank account, life insurance, or human resources documents. In fact, this often the worse time to make these decisions if you have not already given it careful consideration. Naming beneficiaries is something you should take very seriously and should consult your estate planning attorney about.

Coordinating Your Beneficiaries

It is important to note beneficiary designations supersede your will or trust.

For example, let is suppose that Dave’s will stated that his entire estate is to be given to Elizabeth, his daughter. Since Dave used a payable on death beneficiary designation on his ABC Bank account, that asset will instead go to Susan, not Elizabeth. In other words, if you name one relative to inherit assets in your will or trust, but some of those assets have someone else listed on the beneficiary designation, then your entire plan is not going to work as you likely intend. For this reason, it is vital to ensure that your beneficiary designations are coordinated or aligned with your estate plan in order to fully protect you and your family.

Of note, many beneficiary forms have a designation for contingent beneficiaries. A contingent beneficiary is basically a “Plan B” to your initial designation. So, in the event your primary beneficiary passes away before you, the contingent beneficiary steps in their place and gets their share of the asset.

Estate Planning Help

The best strategy for ensuring your wishes are carried out is to first understand how naming beneficiaries has a significant impact on your heirs and then coordinate your wishes with an estate planner. Call us at 301.892.2713 to help you coordinate all of your assets and beneficiary designations with your estate plan so that everyone gets the protection they deserve.

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