Who Are Your Beneficiaries?

A will and a revocable living trust are vital tools when it comes to estate planning. What some people fail to realize, however, is that a large part of their estate will pass through beneficiary designations from life insurance policies, retirement accounts and other arrangements.

1. Understand the basics. You can name beneficiaries for a broad range of assets, including retirement plans, annuities and financial accounts. When you designate a beneficiary, those assets will pass directly to that individual or organization; they will not need to go through the probate process, which can be costly. Generally, if you fail to name a beneficiary, your assets will pass either according to your will or according to state law if you have no will.

2. Don’t forget to review. Beneficiary designations will override bequests directed in your will, so it is crucial to review your beneficiary designations on a regular basis (along with your will and other estate documents). If you can’t recall the beneficiaries of your life insurance policies, retirement accounts and other financial accounts, it’s time to examine all those documents. Not only is it important to know who you’ve named, you should also make sure the beneficiary designations are updated regularly so that they are coordinated with your overall estate plan.

3. Consider the tax consequences. It’s wise to get professional advice when naming beneficiaries because some assets, especially retirement accounts, create income tax burdens for heirs. Those who own IRAs and other retirement accounts are often surprised to learn a large percentage of their accounts may be lost to estate and income taxes upon death, leaving little remaining for their heirs. Instead, you can leave all or a portion of an IRA to the Boys and Girls Clubs of East County Foundation and leave other assets to your loved ones. Simply contact the administrator of your IRA for a change of beneficiary form. For more information about how you can include the BGCEC Foundation in your plans, contact us.

Forrest Higgins, Executive Director | 619-440-1600