Illinois Estate Planning and Elder Law Blog
When it comes to estate planning, one item that can often be forgotten or overlooked but can also be easily remedied is updating your beneficiary designations. Taking an hour of your time now to look these over can ensure you have a say in what happens to these funds when you’re gone.
A beneficiary – which can be either a person, entity, or charity – is named to make the transfer of money quick, easy, and clear. While people often choose their spouse, child, or another family member to be the beneficiary, you can also choose a trustee of a trust, an estate, or a charity.
The most common accounts that allow you to name a beneficiary to inherit the account value upon your death are:
- Retirement accounts, including:
- 401(k)
- 403(b)
- 457
- Traditional IRA
- Roth IRA
- Pension plans
- Life insurance policies
- Annuity contracts
- Certain non-retirement accounts called “Transfer on Death” or “Payable on Death”
The biggest advantage of these types of accounts is that they avoid probate. Beneficiary designations take precedence even over what a will might say. If an account has no named beneficiaries and this hasn’t been addressed in plan documents or custodial agreements, the account would then be subject to probate.
There may be primary, contingent, and tertiary beneficiaries. Contingent beneficiaries come next in line following the primary beneficiary, should the primary beneficiary pass away before the policy or account holder has passed. When you name more than one beneficiary, whether primary or contingent, you must detail the percentages allocated to each. You can also make a tertiary beneficiary designation who would be third in line for the distribution of these assets.
When deciding upon who to name as beneficiaries, consider who will feel a financial impact if you were to die. People usually name a spouse as the primary, with children (or their trustees, if they are minors) as contingent. However, if you are financially responsible for another family member, that person could also be added as a beneficiary.
In next week’s post, I will write about different ways assets can be divided among beneficiaries.
For assistance creating or updating your estate plan, contact us at Wilson and Wilson Estate Planning and Elder Law, LLC at 708 482 7090 for our main office in LaGrange, Illinois or at 847 656 8958 for our Northbrook, Illinois office.
This Is the First Step of Estate Planning, and It Only Takes an Hour to Do