Spring 2012: The Importance of the Beneficiary Form

Once you have signed your estate planning documents, one more critical task is at hand – properly completing the beneficiary forms on your accounts and assets such as retirement accounts and life insurance policies.

All too often, significant attention is devoted to estate planning documents and scant attention to the beneficiary designation. As a general rule, the designated beneficiary will receive the account or asset for which he or she is named notwithstanding a contrary provision in a Will. For this reason, we recommend carefully scrutinizing your beneficiary designations at the time you are establishing or revising your estate planning documents.

We also recommend that you do not rely solely on beneficiary designations to carry out your estate planning desires. For example, if you name an individual as the beneficiary of your retirement account and he or she predeceases you, the retirement account will be payable to your estate. This may not seem like a problem, however, this may result in the loss of significance tax benefits to your beneficiary.

We also recommend avoiding jointly held accounts in most cases except between spouses. Many people who add a child or sibling on a bank account fail to realize that the account then becomes potentially attachable by the joint owner’s creditors. This can often times be avoided by using a trust in your estate plan.