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Unique Estate Law Blog

Friday, October 21, 2011

Financial Friday: Check Your Beneficiary Designations

Unique Estate Law brings you another post from financial advisor, Jay Dworsky.  This week he discusses the importance of properly filling out, and timely review of, beneficiary designation forms. This is a crucial part of your estate plan and you should work with both your estate planning attorney and a financial advisor to ensure that your plans are not thwarted by imporoper forms for  your life insurance policy or retirment plans.

What is a beneficiary designation?

September was life insurance awareness month. If you didn’t buy that policy you’ve been thinking about, at the very least check your beneficiaries.  A beneficiary is the recipient of funds, property, or other benefits, as from an insurance policy or will. If you own a life insurance policy or participate in a retirement plan, such as an IRA, 401(k) plan, or 403(b) plan, you are asked on the application to name a beneficiary to receive the proceeds of your plan at your death. A beneficiary designation allows you to transfer the proceeds without going through probate. You can choose your spouse, a child, another adult, a charity, a trust, a partner, or your estate as a beneficiary. If you're married, however, the law may restrict your choice. Certain retirement plans require you to name your spouse unless he or she signs a form waiving this right.

How are some advantages of beneficiary designations?

  • If you own a life insurance policy or a retirement account, you get to name the beneficiary of the proceeds from those accounts
  • You are able to avoid the expense, delay, disruption, and lack of privacy of court proceedings
  • ?It is easy to do - simpley fill out a form
  • Simple to set up, change designations, costs nothing
  • Avoids probate; proceeds automatically pass to your beneficiary after your death
  • You own the property until your death
  • You can change the beneficiary at any time, subject in some cases to certain spousal rights
  • Trumps your will or Minnesota intestacy laws
  • Difficult to challenge

What else should I know about beneficiary designations?

  • Retirement plan proceeds frequently are subject to income tax
  • Proceeds of retirement plans or insurance contracts may be subject to estate tax
  • Choice of beneficiary is a factor in determining how quickly the funds of retirement plans are distributed after you die
  • Some plans don't allow alternate beneficiaries
  • You lose control of the funds payable under a retirement plan or insurance contract after your death, unless you designate a trust as beneficiary

In summary, please take the time to ensure your beneficiary designation forms are set up properly.  This is a simple - free - way to know that your assets are going to your chosen beneficiaries.  Having these in place allows your heirs to avoid probate for any assets directed through these forms and will trump your will or intestacy statutes so that you can direct the funds to anyone (with some restrictions on retirement assets if you are married as noted above). 

 

 


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From within Hennepin County Unique Estate Law represents estate planning and elder law clients throughout Minnesota, including Minneapolis, Edina, Bloomington, St. Louis Park, Minnetonka, Plymouth, Wayzata, Maple Grove, St. Paul, and Brooklyn Park. The Minnesota law firm of Unique Estate Law focuses on all aspects of estate planning, including specialized wills, trusts, powers of attorney and medical directives for married couples, young families, blended families, single parents, gay families and those going through a divorce. Unique Estate Law also handles probate administration, asset protection, Medical Assistance planning, elder law, business succession planning, adoptions and cabin planning.



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