David’s family was relieved to realize he had completed an estate plan several years before his death at age 72. However, their relief turned to dismay as the estate’s personal representative began to learn more about his financial holdings. David had stated many times that he wanted his estate split equally between his five children. However, he also had named beneficiaries for bank accounts, retirement accounts, and several insurance policies. The balances of some accounts had dramatically increased or decreased. In addition, the accounts were not divided evenly among his children, which meant some heirs received more money than others. Unfortunately, David had not realized how important it was to consider beneficiary designations while preparing his estate plan.
Beneficiary Designations Are Beneficial
Most financial accounts and insurance policies allow account holders to name beneficiaries to receive the funds in their accounts upon their death.
Accounts with named beneficiaries typically do not pass to heirs through probate. Instead, funds go directly to the beneficiaries named by the account holder. Heirs receive their money faster with beneficiary designations.
Include Them in Your Estate Planning
When beneficiary designations are not in sync with estate planning, unintended imbalances may happen. A well-meaning person might write a Will, or create a Revocable Living Trust, dividing their assets according to what they are worth at the time, not accounting for fluctuations in value. Testators may change beneficiary designations over the years but fail to change their Wills and trusts. Accounts may be opened and closed after a Will has been signed or a trust established. Heirs may pass away or become estranged but are never removed from beneficiary designations.
One thing David could have done is to simply designate all his children as beneficiaries on all his accounts. Even then, though, without proper estate planning, his money would be disbursed with no consideration for the descendants of those beneficiary who don’t survive him. An estate planning attorney could advise strategies to keep this from happening.
Had David simply neglected to complete beneficiary designations, the money in his accounts would have become part of his probate estate or handled by his Revocable Living Trust. His heirs would not have received their share of his estate until after probate/trust administration was complete. By that point, the estate would have been reduced by court costs and attorney’s fees.
Keep Your Estate Plan in Balance
At Virtus Law, we can help you develop an estate plan that meets your needs. Contact us by calling 612.888.1000 or by emailing us at firstname.lastname@example.org. Our main office is in Minneapolis, with other offices located in Maplewood, Cambridge, Edina, Mendota Heights, and Red Wing.