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.