Choosing the Right Beneficiaries

Typically, many people tend to think an estate plan only includes your Will. In today’s day and age, however, most people have a much more diversified estate plan than they realize. Your estate plan is far more than just your Will and includes things like trusts, investments, retirement accounts, and insurance policies. One of the challenges of comprehensive estate planning can be understanding how these assets work and to whom they should go to. Recently, Forbes explored the way several assets within a typical estate plan usually work and understanding this could be an important part of your estate planning decisions.

Wills and Trusts

Those selected to benefit from assets distributed through a Will may have to wait a little longer than if you were to use a trust or other vehicle to distribute such assets. Wills are required to go through the probate process to prove that they are valid and to make sure they comply with the law. Typically, assets within a Will cannot be touched until the probate process is complete. While the probate process in New York is easier than elsewhere, it can still be time-consuming especially for an individual that may need immediate access to the assets in your Will.

Usually, a trust is established with someone or something in particular in mind. You can establish a trust for your children or even a charitable trust. Trusts have the added advantage of being able to avoid probate, so assigning assets to a trust means that they will ultimately pass upon your death to the individual or entity for whom the trust has been established. Trusts can be revocable or irrevocable, and within each category are myriad options to achieve your desired estate planning objectives.

Life Insurance

Benefits from a life insurance policy are typically available to the beneficiary very quickly. Once appropriate documentation is provided, the funds can usually be released. When you are choosing whom to release such funds to, you should consider who would need to access the funds quickly in case of your death. Typically, minor children are not eligible to receive these funds and if you fail to appoint a guardian for those children or for such funds until the children are of age, then you risk the state stepping in and appointing someone to manage those funds. You can create a trust to handle life insurance benefits, too.

Retirement Plans

Beneficiaries of retirement plans could have to face tax consequence depending on the type of retirement plan in question. You may want to consider naming a trust as the beneficiary of a retirement plan because trusts can be established in a way that protects assets within them from creditors that may try to access retirement funds upon your death to settle outstanding debts. Often, retirement plans require certain disbursements or withdrawals over a period of time, so the age of the beneficiary of these plans could impact the amount of money ultimately available from the fund.

Consistency and Accuracy

Always make sure that your beneficiaries and other pertinent information is consistent across your estate plan. That is not to say that the same person must be the beneficiary of all of your assets. However, if you are assigning life insurance benefits to a person you want to be the guardian of your children in case you die before they are of age, then make sure your Will and other parts of your estate plan have legally nominated that individual to be your children’s guardian. Make sure to review your estate plan every few years and work with your estate planning attorney to address any concerns or major life events that could impact your estate planning objectives.

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