Estate planning often involves many different types of assets. In addition to real estate and personal property, your estate plan may include checking and saving accounts, retirement accounts, trusts, and other types of funds.
For many of these assets, the best way to make sure your wishes are honored is specifically designating a beneficiary who will receive the funds or other property as part of your estate planning in Covina.
The person or people you name as beneficiaries do not necessarily have to be the heirs who will inherit property passed through your will. You may designate different beneficiaries for different accounts, or even allocate percentages to different beneficiaries.
These decisions may have tax implications or may affect eligibility for financial aid or other government benefits. Therefore, it is wise to seek the advice of an experienced estate planning attorney before making your beneficiary designations.
Why Beneficiaries Must Be Named
The primary reason to designate a beneficiary is to name the person who is to receive an asset upon the death of the owner. Several different types of assets will descend more easily through the inheritance process if there is a designated beneficiary. Some of these include the following:
- Saving and checking accounts
- Insurance policies
- Retirement accounts like IRAs or 401(k)s
- Annuities
- Trusts
In some cases, the owner can name the beneficiary directly with the bank or insurance company. For other assets, the beneficiaries are named in the will or other estate planning documents.
However, beneficiaries are not the same thing as heirs and do not always have to inherit through the will. In the event that a person dies intestate, or without a will, the people who inherit through the probate process are also called heirs.
Naming someone as a beneficiary means they can inherit the asset directly without having to go through the probate process. This saves a significant amount time and money and ensures that the deceased person’s wishes are honored.
Selecting Beneficiaries
Choosing a beneficiary may seem like a straightforward decision at first. A person usually wants the people closest to them to be the ones who will receive the money in their accounts or insurance policies after they are gone. However, it is not always as simple as it may seem.
Leaving someone a gift outright might have undesirable tax implications or may affect their eligibility for certain types of benefits or scholarships. It is important to consult with a Covina estate planning attorney who can review all the different factors at play prior to designating a beneficiary.
Common Types of Beneficiaries
Beneficiaries can be divided into four main types based on their relationship to the asset owner: eligible beneficiaries, designated beneficiaries, non-designated beneficiaries, and contingent beneficiaries.
Eligible Beneficiaries
Eligible beneficiaries are people like spouses, children under 18, and disabled or chronically ill individuals. These are the parties that it is generally expected a person would want to leave their asses to when they are gone. As such, they may have additional rights compared to designated beneficiaries, who are other individuals like siblings, extended family members, or friends.
Non-Designated Beneficiaries
Non-designated beneficiaries are simply non-living entities that can still receive assets such as trusts, estates, or charities. An estate planning lawyer in Covina could explain these beneficiary designations in more detail during a consultation.
Contingent Beneficiaries
Contingent beneficiaries are like “backup” options in the event the primary beneficiary is unable to receive the asset. For example, someone may designate their spouse as their primary beneficiary on a life insurance policy but name their child as the contingent beneficiary.
In this situation, if the spouse passed away first, the child would become the new beneficiary of the proceeds from the life insurance policy.
Contact a Covina Attorney for Help With Beneficiary Designations in Estate Planning
It is not always easy to think about what happens after we are gone, but it can be reassuring to know that your loved ones will receive the benefits of your hard work. Designating beneficiaries in Covina estate planning is one way to make sure the ones you care about the most are supported in the future.
If you are working on your estate plan and have questions about choosing beneficiaries, contacting a lawyer is an essential first step. They can discuss your situation with you, help you identify and organize all your assets, and come up with the plan that best benefits you and your loved ones.
