Here are items to consider:
Be specific and stay
current. When you name a beneficiary, your assets can pass directly to that
person or entity without going through a legal process called probate. Update the
designations for life events such as divorce, remarriage, births, deaths, job
changes, and retirement account conversions.
Think about unexpected
outcomes. Be alert for the effect of taxes and unintended consequences. For
example, if the money in your accounts is distributed directly to your heirs,
they may be stuck with a large unexpected tax bill. For wealthier heirs, estate
tax may also play a role. In 2016, the estate tax exclusion is $5.45 million
and the top estate tax rate is 40%. Another concern: If one of your designated beneficiaries
is disabled, government benefits may be reduced or eliminated by the transfer
of assets. You may want to consult an attorney to establish a special needs
trust to ensure your loved one is not adversely affected.
Name contingent
beneficiaries. If your primary beneficiary dies or is incapacitated, having
a backup, or contingent, selection will ensure that your assets are properly
distributed. In some cases, a primary beneficiary may choose to disclaim, or
waive, the right to the assets. In that case, contingent beneficiaries can step
up to primary position.
Practice good
recordkeeping. Keep your beneficiary designation forms in a safe location,
and maintain current copies with your financial institution, attorney, or
advisor.
Beneficiary designations are an important part of estate
planning. Contact us at (518) 798-3330 for more information.
