A Guide to Planning Your Estate: Protect Your Loved Ones (Part Two)
Tips on how to help protect your loved ones’ financial future, as well as your own.
Get your beneficiary designations in order. Several types of assets, such as life insurance and assets held in financial accounts, can be transferred by beneficiary designation rather than by your will or other estate planning documents.
The big advantage of transferring assets by beneficiary designation is that those assets will not have to pass through probate after the owner’s death, which can save time and money. As long as you name a specific person, charity, or trust as the beneficiary, the assets will generally be transferred directly to the beneficiary after the owner dies (or the last surviving owner dies, if the assets are owned jointly). And until the owner dies, the beneficiary has no rights to the assets.
If you name your estate as the beneficiary, those assets must pass through probate before they can be distributed.
Assets that can transfer by beneficiary designation include:
- Checking and savings accounts typically offer a payable-on-death or in-trust-for option that enables you to indicate who will inherit the money in the account.
- Investment accounts generally offer a similar beneficiary option known as transfer-on-death, or TOD.
- Retirement plans, such as IRAs and 401(k) plans, allow you to name a beneficiary to inherit that assets in the account. If you are married, your 401(k) beneficiary choice is limited to your spouse unless you get your spouse’s written permission to name someone else. In community property states, you may also need your spouse’s written consent to name a primary IRA beneficiary other than your spouse.
- Life insurance policies pay their proceeds directly to the beneficiary named in the policy.
- Vehicles can be transferred in some states to the beneficiary you name on the vehicle registration form.
- Real estate can be transferred in some states to the beneficiary you name on the deed.
Choose your beneficiaries carefully. Beneficiary designations generally take precedence over any instructions to the contrary in your will.
It is also important to remember that you can change your beneficiaries at any time. In fact, it is a good idea to review your beneficiary designations every year or so to ensure that they still reflect your current thoughts on who should inherit your assets.
With offices in Williston and Rutland Vermont, Copper Leaf Financials’ team of experienced financial planners work with clients to assure that all of the vital components of your financial plan are in order – from estate planning to retirement planning. We can help you put all of the legal documents in place to ensure that everything goes according to your plan. For more information call 802.878.2731.