Often, the assets that an individual plans to pass through their Will are carried out as desired. However, it is important to remember that only assets in a person’s name alone pass through probate. Assets that are joint or payable by a beneficiary designation, such as life insurance or retirement benefits, do not pass through probate, but rather, pass outright to the beneficiary.
Therefore, it is very important to consider and properly designate the names and back-up beneficiaries on retirement plans and life insurance, which are often times greater than other assets that may pass through a Will.
If you are single, you should check your beneficiary designation to ensure that your life insurance and retirement benefits pass to the desired beneficiary and in the correct proportion. For example, if you’re single without children, you may want your siblings or nieces and nephews to be your beneficiaries instead of your parents. Your parents could be elderly and institutionalized, which would mean that funds left outright to them will merely be used for long-term care expenses.
If you are single with a minor child, and if your child is the beneficiary of those benefits, he/she will receive them at age 18. In the meantime, a guardian may have to be appointed by the Probate Court to hold those funds for the benefit of your child, and the guardian may in fact be your divorced, former spouse.
If you are married, you would normally name your spouse to be the beneficiary of life insurance proceeds, but there should also be a secondary beneficiary in case you both die together in a common disaster. In this case, it may be appropriate to designate that the beneficiary is a trust for the benefit of your children, rather than leaving the funds outright to them. If there is no beneficiary designation made, then the balance of the funds that are paid by the insurance company will be payable to your estate, and thus have to pass through the probate process, making the distribution more costly, time consuming and public.
Regardless of your life situation, your beneficiary and back up beneficiary designations should be reviewed often to ensure that they are properly completed. For instance, you may have made your spouse the beneficiary designation of a life insurance policy, but what happens if you are now separated or divorced? Upon your death, the beneficiary designation is payable under a contractual relationship, regardless of what your Will says, and therefore, the proceeds will be payable to your ex-spouse, which is probably not what you want.
Many beneficiary designation forms also permit a portion to be paid to multiple beneficiaries rather than having all funds left to one particular beneficiary. Whether a specific beneficiary receives a dollar amount or a percentage of the proceeds, the form should be reviewed often and kept with all your other important papers, such as the policy itself, your Will, Health Care Proxy, Power of Attorney, and Trust, if applicable. As much care should be taken to complete these important forms all the rest of your legal documents.
By: Hyman G. Darling, Esq.
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