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Beneficiary Designations

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"We had our trust revised and our wills reviewed and were very impressed with the care and service we were given. We plan on using be using this firm whenever a lawyer is needed.. Her service is anything but mechanical. We were not rushed and were given suggestions concerning changes we were looking for. I highly recommend her to anyone." - Marty G.

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One of the most common questions I receive from clients is the question of beneficiary designations and how they relate to their Will or Trust.

One important thing that must be said is that beneficiary designations, including IRA’s, life insurance, annuities, bank accounts, etc., go outside probate and the trust. What is said in the Will does not effect what is said in a beneficiary designation.

For instance, if you want to leave your two children 50/50 of your estate, and you put that in your Will or Trust, but leave only one as a beneficiary or joint owner of an account, that one child will receive the entire amount of the account, and the other child has no legal right to the other half. Beneficiary designations  trump whatever your Will says about the other assets.

This can also play a role in Guardianship designations in a Will or Trust. Some people believe that if they designate a guardian for their child in their Will or Trust, and then leave that Guardian as a beneficiary on an account, that the guardian will be obligated to use that money for the child’s use once they become legal guardian. This is not true. If the named beneficiary is left as a beneficiary on an account, then it is legally their money, not the child’s. You can leave the child as the beneficiary, and once the legal guardian is approved by the Court, they can access the account for the child’s use.

That being said, it is great to have beneficiaries on accounts, because it makes a lot of sense and allows the executor or trustee to focus on fewer assets to disburse. However, always keep in mind the distinction between beneficiary in a Will or Trust, and a beneficiary on an account.

If you do not have a Will or Trust set up, please contact our office today to set up an appointment!

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3 Comments

  1. […] important thing to update after a divorce is beneficiary designations on accounts. When you select beneficiaries for life insurance, retirement plans, or bank accounts, […]

  2. […] two page form that the financial institution provides you. (See more about that at our post about Beneficiary Designations). However, one type of asset that is often left behind is an automobile, boat, or any other titled […]

  3. […] last simple (and completely free!) action to take is to name beneficiaries on your accounts, whether retirement, banks, life insurance, etc. All you need to do is fill out […]

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