Beneficiary Designations
Sum mary
A beneficiary designation is a tool that may help clients in achieving their estate planning objectives. It will allow the transfer of an asset to another person immediately upon the owner’s death.
Beneficiary Designation
A beneficiary designation is a way in which a person can transfer assets upon their death. It is a type of contract transfer and will avoid the probate process.
For example, if one owns a life insurance policy with specifically designated beneficiaries, the entire death benefit passes under the terms of the insurance contract to the stated beneficiaries. Likewise, with an annuity contract or an IRA, one designates specific beneficiaries. At the time of death, assets pass directly to those named individuals. Assets that pass by contract to named individuals avoid the probate process. Therefore, a will does not affect the passing of these assets unless the estate is the named beneficiary.
Benefits of using a beneficiary designation include:
• Easy to establish
• Generally inexpensive
• Amendable during one’s lifetime
• Avoids probate
Examples of property that can pass by contract include:
• Life insurance
• Annuities
• IRAs
• Employee benefit programs
• Titled motor vehicles (in most states)
• Brokerage accounts (in most states)
In many states, it may also be possible to transfer real estate outside of the probate process. The client should always discuss their beneficiary designations with their estate planning attorney to ensure that they are consistent with their overall estate plan.