Like some people, you probably understand the importance of a will and have a clear idea of how you want your assets, real estate, property, and personal belongings to be distributed after your death. You may have even thought about your overall estate plan and whether you need medical directives or a trust. Hopefully, you’ve also taken steps to get advice from a competent estate planning attorney to draft up the required paperwork.
Choose Your Beneficiaries Wisely
What you may not realize, however, is that choosing a beneficiary on your annuities, bank or retirement accounts, and life insurance policies is also extremely important. It is so crucial that most times, the information you submit will prevail over conflicting information on your will. To explain further, let’s say that you list your sister as your beneficiary on all your accounts and you change your mind and list your brother as your beneficiary in your will – your sister will inherit the accounts because the listed beneficiary in your account supersedes what you put in your will.
Therefore, it is essential that you think carefully about your choice of heirs to ensure that your will matches any other documentation including beneficiary information listed on accounts.
Primary vs. Contingent Beneficiaries
There are typically two types of beneficiaries: primary and contingent (or secondary). The primary beneficiary is your first choice and is the person(s) who will receive the assets from your designated account (bank, retirement or other account) first. In contrast, a contingent beneficiary receives any designated benefits after you and the primary beneficiary die. When designating beneficiaries, think carefully about who will be primary and contingent beneficiaries and what percentage of your assets will go to whom.
You can choose anyone you like – your spouse, parents, brothers, sisters, children and even friends, or your favorite charity. Keep in mind that choosing an heir is an important decision that should be thought about carefully. There may be tax ramifications for your heirs that also need to be considered, and because minors can’t inherit property, name a guardian before leaving property to a minor.
If you have questions about estate taxes, whether you need a will or trust, or any other estate planning question, contact Ibekwe Law, PLLC.