Are you in the process of creating an estate plan? Are you making changes to an estate plan that you already have in place?
Although there are many things you need to think about, at some point you will turn all your attention to choosing the right beneficiary or beneficiaries.
It goes without saying that you have intentions of leaving behind many asset types to your loved ones. With this in mind, you need to consider a variety of details when naming beneficiaries.
Here are some of the most common asset types and some things you need to think about:
— Life insurance. Upon your passing, your life insurance death benefit is paid out to your beneficiary. Since these funds are typically distributed in a timely manner, think about who may need immediate access to cash upon your death. An example of this would be a spouse who will need the money to pay your final expenses.
— Retirement plans. If you have a retirement plan, you need to strongly consider whom you name as the beneficiary. For some people this is as simple as naming a spouse, but this isn’t always the right choice. Not only should you think about who needs the money, but you should also focus on the tax implications.
— Other assets. If you have a will, your estate will go through the probate process upon your death. Your assets will not be distributed until the process is complete. So, if you are using a will, make sure your beneficiary is in a position to wait. Probate can drag on for many months or longer, especially if someone files a will contest.
There is no right or wrong way to name a beneficiary for these types of assets. You need to consider all your options, weigh the pros and cons of each one, and then make a final decision in a timely manner.
Once you name the right beneficiary for each type of asset, you will feel better about the current state of your estate plan and what will happen when you pass on.
Since there are so many questions to answer and challenges to address, consulting with an estate planning attorney can remove a lot of the stress from the process.