Beneficiary Designations: More Important Than You May Think

In Florida, one of the simplest ways to ensure someone receives your assets, is to name a specific person as a designated beneficiary on your accounts. By law, beneficiaries (individuals or institutions) you designate for an account will receive assets in that account upon your death (avoiding probate).

What type of accounts allow a beneficiary designation?  

·      Retirement Accounts

·      Life Insurance policies

·      Annuities

In South Florida, it is important to name both a primary beneficiary and contingent beneficiary. The contingent beneficiary will receive the assets if the primary beneficiary predeceases you.

What type of account does not include a beneficiary designation?

Brokerage accounts do not include beneficiary designations, but you can complete a Transfer on Death (TOD) agreement to designate how your assets should be distributed.

“It is important to review your beneficiary designation regularly, especially when there is a life changing event (marriage, divorce, birth of a child, or death of a spouse)”

You must complete a separate TOD agreement for each single or joint account you have. A TOD agreement assigns beneficiaries, which helps you avoid the costs, delays and publicity of probate. Without the designation assigned to the account, the account would be subject to probate.

It is important to review your beneficiary designation regularly, especially when there is a life changing event (marriage, divorce, birth of a child, or death of a spouse). If you do not update your account beneficiaries, your assets could be inherited by someone you no longer wish to receive (ie. ex-spouse)

Keep in mind beneficiary designations trump what ever is stated in a will or trust. However, the will or trust can help direct how the funds will be distributed to the intended beneficiary. For instance, you might have a child who you do not trust with money, the will or trust will give instructions on how the money will be distributed to the child over a period of time so they don't spend all the money at once.

If you live in Miami-Dade, Broward, or Palm Beach county contact an experienced estate-planning attorney at The Hershey Law Firm, in Fort Lauderdale, Florida, at (954) 303-9468 to discuss your estate planning needs. You can’t predict the future, but you can plan for it.

Estate Planning for Retirement: Pay on Death Accounts

Your estate consists of both probate and non-probate assets. When you prepare a will you include probate assets to be distributed to named beneficiaries. If you have non-probate assets, regardless of whom you name as a beneficiary in the will, they will go directly to the pay on death “POD” beneficiary directly in the document.

Probate Assets:

Personal items, jewelry, art, antiques

Individual assets (property titled solely in your name)

Non-Probate Assets (Pay on Death):

• Life Insurance
• Retirement Accounts (401(k)s and IRAs),
• Annuities
• Bank Accounts (some)
• Jointly owned assets “tenancy by the entirety” “ with rights of survivorship”

A pay on death (POD) account names your beneficiary. As the name suggests, when you (the primary account holder) passes away the assets that are left in the account become the property of the named beneficiary.

“If you have non-probate assets, regardless of whom you name as a beneficiary in the will, they will go directly to the pay on death “POD” beneficiary directly in the document.”

There are some positives that come along with these accounts. These assets are outside of the probate process and there is a direct transfer to the named beneficiary.  You also retain control over the funds throughout your life and have the right to change beneficiaries or even close the account if you want to. Flexibility is certainly a good thing when it comes to your hard earned assets.

However, pay on death accounts are not a comprehensive estate planning solution. These assets are still a part of your estate for estate tax purposes so they do nothing to provide tax efficiency. There are no incapacity provisions, and you may not be able to give varying percentages of the resources left in the account to multiple respective beneficiaries.

If you live in Miami-Dade, Broward, or Palm Beach counties it is time to start preparing your estate-planning portfolio. Make sure both you and your family are taken care of in the future. You can’t predict the future, but you can plan for it.

Contact an experienced estate-planning attorney at The Hershey Law Firm, in Fort Lauderdale, Florida, at (954) 303-9468 to discuss your estate planning needs.