Plan For The Future With Confidence

Plan For The Future With Confidence

Beneficiary designations are critical in estate planning

On Behalf of | Jul 23, 2023 | Estate planning

Beneficiary designations are one of the most critical considerations for Maryland residents when they begin planning their estate. However, many people don’t put much thought into them or forget to do them altogether. Not having the proper beneficiary designation or missing them entirely can spell disaster when the time comes to pass on your assets.

Why beneficiary designations are so important

Many different documents and accounts in your estate plan ask you to name a beneficiary. Even though your will may specify which individuals should get your assets, the beneficiary listed on a life insurance policy, for example, will be the one to get the payout proceeds, not someone listed in the will. Beneficiary designations supersede many other estate documents, necessitating care when you name an individual.

You’ll find beneficiary designations on many types of documents. These include:

  • IRAs
  • Employer-sponsored retirement plans
  • Annuities
  • Life insurance policies
  • Stock options and restricted stock
  • Executive deferred compensation plans
  • Transfer-on-death (TOD) investments
  • Pay-on-death (POD) bank accounts

Keeping up with all beneficiary designations can be challenging. If you have just started on your estate plan, now is an excellent time to gather your accounts and go over all beneficiary designations to make sure you have named someone and that they are accurate. Afterward, review pertinent documents to ensure they still meet your wishes.

Tips for handling beneficiary designations

Sound estate planning means much more than ensuring that appropriate names are on all documents. Coordinating with your will and trust is necessary, as is the need to understand your estate documents as a whole. To that end, don’t name your estate as a beneficiary of the documents above. Naming your estate as a beneficiary for IRAs and similar accounts will require those assets to go through probate.

You should also exercise care when naming a trust as a beneficiary. This tactic works when your beneficiaries are minors, if you are in a second marriage, or if you want control of your funds. Consulting with appropriate professionals can help you choose appropriate beneficiaries and even help remind you to perform periodic reviews for updating.