Beneficiary Designations
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Beneficiary Designations

Frequently, one of the fundamental goals in estate planning is to avoid probate. Together with a revocable living trust, beneficiary designations could also be a choice in reaching this goal. Naming an individual as a beneficiary on a particular asset, like an IRA, 401k, or a life insurance policy, typically bypasses the probate process, when correctly titled.

Types of Beneficiary Designations

Beneficiary designations is the title of the individual and/or individuals you want to receive a particular asset upon your passing. A general instance of a beneficiary designation would be naming your spouse and/or children as beneficiaries on your life insurance policy. It’s important to emphasize, despite that, beneficiary designations are unable to be added to all types of property.

Beneficiaries can comprise of spouses, children, other members of your family, trusted friends or even charitable organizations. Beneficiary designations can usually be added to assets like financial institution accounts, savings accounts, retirement pensions, life insurance policies, savings certificates, and a multitude of other assets. Designating a beneficiary is going to determine how an asset gets distributed at the owner’s passing, regardless of the terms of the individual’s will or trust.

Two distinct types of beneficiary designations are put in place for real estate, financial institution accounts and other kinds of assets. Pay on death “POD” and Transfer on death “TOD” designations enable you to add a beneficiary to specific kinds of assets. Under these circumstances, the designated beneficiary gets the assets when you pass away, without the asset being subjected to probate.

  • POD Designations
  • TOD Designations
  • Life Insurance Annuities

Whereas beneficiary designations can, and do, play a significant part in the general estate planning process, it’s important to realize that they alone should not be thought of as an “estate plan.” Also, comparable to a will, beneficiary designations only go into effect upon the passing of the owner. They don’t provide the owner or the beneficiary safeguarding in the case of incapacitation. It is because of this, it’s important to think about the benefit of other legal documentation, like a will, revocable living trust, POA or other legal documentation as part of a general more thorough estate plan.

SECURE Act and Designated Beneficiaries of Retirement Pensions

Because of the SECURE Act, there are 3 categories of beneficiaries on the basis of the recipient’s relationship to the initial account owner, how old they are, and if they are a person or non-person entity. The 3 groups are eligible designated beneficiaries, designated beneficiaries, and non-designated beneficiaries. The 5 groups of individuals deemed to be eligible designated beneficiaries are:

  • The owner of the accounts surviving spouse
  • A minor child
  • A debilitated individual
  • A chronically ailing individual
  • An individual no more than ten years younger than the decedent IRA owner

If a living individual that is named as a beneficiary of a retirement account doesn’t fall into these five groups, they are deemed to be a designated beneficiary.

Source:

  1. Beneficiary designations. Legacy Assurance Plan. (n.d.). Retrieved January 26, 2022, from https://legacyassuranceplan.com/beneficiary-designations/
  2. Tuovila, A. (2021, May 19). Designated beneficiary. Investopedia. Retrieved January 26, 2022, from https://www.investopedia.com/terms/d/designated-beneficiary.asp

Estate Planning Attorney in Phoenix, Arizona

Here at Ogborne Law, we are proud to include estate planning among our services. Your estate planning attorney will work closely with you to draw up all the documents you’ll need to communicate your wishes to the court. We’ll take the time to answer all of your questions and guide you through this important process. If you’re ready to start your consultation with Ogborne Law, visit our Estate Planning Consultation request page.

Regardless of the choice you make, it’s important you make the best choice for you when hiring an attorney. Remember: The decisions you make now can affect your future. Ultimately, choosing the best lawyer will depend on which lawyer feels best for you and your situation.

If you want to learn about Michelle N. Ogborne and see if she is the right attorney to represent you in your collaborative divorce in Arizona, contact us today! There are so many aspects to consider in estate planning, and we haven’t even touched on those individuals who own a business! You’ve worked hard for your life, and you need to protect it. You owe it to your family and your legacy to take care of planning now.

Contact Ogborne Law to schedule your estate-planning session.

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