Should You Have A Beneficiary For Your Estate
It’s important to designate a person to be a beneficiary to
your estate and assets. The considerations you need to look
for in your beneficiary will depend on two key factors:
• Laws of
the state in which you live in
• Personal
circumstances
What A Beneficiary Is
This is the person who will receive assets or funds from your estate
when you pass on. You have the option to name a primary beneficiary as
well as secondary beneficiaries. You have the option to designate more
than one beneficiary for both the primary and secondary.
When you have a beneficiary, any proceeds of your estate go to that
person, not a probate court. Any proceeds of a life insurance policy is
not subjected to income tax. If there is an estate tax, any life
insurance monies will be directed to the estate tax. A “trust” can help
with this very issue.
Why It’s Important To
Have An Estate Attorney For The Security Of Your Assets
Due to the complexity of this issue, it’s best to work with an estate
attorney that can draft a will and, if needed, a trust. When talking to
the attorney, be sure you bring up information about life insurance
policies. If a will or trust is already in place, talk to your attorney
before you get a life insurance policy. If you don’t have a will or
trust, you can designate who the primary beneficiary of the life
insurance at any time.
When you have more than one beneficiary listed, you have the option to
add in clauses that distributes death benefits:
• Per
Capita - If a beneficiary dies before the insured person does, the
living beneficiaries will distribute the assets equally of that
beneficiary and still receive their portion of the death benefit when
the insured does die.
• Per
Stripes – Should a beneficiary pass away before the insured does, the
beneficiary’s portion of the estate will revert to the heirs instead of
going to the other listed beneficiaries. It’s important that everything
is clearly laid out, because you won’t be around to clarify things for
them.
Be sure that everybody’s names are spelled correctly and no mistakes in
spelling. If you list a child under 18 as a beneficiary,
their physical guardian will have financial guardianship of their
benefit. Of course, you can deal with that by having a will or
trust. Therefore, speak with an estate planning attorney to
get all your “I”s dotted and your “T”s crossed.
Another issue to consider is when both the primary beneficiary and
insured dies at the same time – car wreck, airplane accident – and the
person who died first cannot be determined. Several states have put
into place Uniform Simultaneous Death Act. This act states benefits are
paid as if the primary beneficiary was the first to die, which makes
the insured’s assets revert to the secondary beneficiaries.
If there should be no secondary beneficiaries, the estate gets the
assets. It’s important to remember this issue when drafting
up a will or trust for your estate.