The Estate Planning Strategy You Can Implement Today
Updated: Jan 6
Was one of your New Year's resolutions to get your estate plan in order? If so, one of the most efficient ways to get some of your most valuable assets in order is to routinely review your beneficiary designations on your retirement accounts and life insurance policies.
Designating beneficiaries on your retirement accounts and life insurance policies is a crucial step in ensuring that your assets are distributed according to your wishes after you pass away. Failing to properly designate beneficiaries can result in your assets being tied up in probate, a costly and time-consuming legal process.
Probate is the legal process of administering a person's estate after their death. If a person dies without a will, or if their will is deemed invalid, their assets may have to go through probate in order to be distributed to their heirs. This can be a lengthy and expensive process, as it involves court fees, attorney fees, and other costs.
By designating beneficiaries on your retirement accounts and life insurance policies, those assets pass outside of your "probate estate" and ensure that your assets are distributed directly to the individuals or organizations you choose. This can save your loved ones time, money, and stress during an already difficult time.
It's important to regularly review and update your beneficiary designations to ensure that they reflect your current wishes. Life events such as marriage, divorce, and the birth of children can all affect your beneficiary designations. By keeping your beneficiaries up to date, you can ensure that your assets are distributed according to your most current wishes.
In addition to avoiding probate, designating beneficiaries on your retirement accounts and life insurance policies can also help to reduce the risk of disputes among your heirs. By clearly stating your wishes in advance, you can help to avoid any potential conflicts that may arise after your death.
Generally, naming beneficiaries can be as easy as filling out some forms (most are now online, if you have access).
Be aware, however, that you may want to name another entity as a beneficiary - namely, a trust - rather than an individual person. This could be due to a second marriage, spendthrift beneficiaries, or for tax purposes. For example, those that may be subject to state or federal estate tax may choose to name an irrevocable life insurance trust (an ILIT) as the beneficiary, rather than individual beneficiaries. ILITs can be the subject of an entire other post, to come in the future!
Designating beneficiaries on your retirement accounts and life insurance policies is a simple but important step that can help to ensure that your assets are distributed according to your wishes and help to avoid probate.
Questions? Call us today to discuss your estate plan at (516) 274-3250.
January 5, 2023
(c) Hogan Law Office, P.C. 2023