A common assumption that individuals make during the estate planning process is that naming beneficiaries in their will is the only necessary step to ensure all their assets are distributed in accordance with their desires upon their death. While this is generally true for assets distributed through probate, the language in a will often does not account for non-probate assets, which can lead to unintended controversy during disbursement.
If you want to make sure your assets go to the right beneficiaries in the right amounts, beneficiary designations will likely plan a crucial role when planning your estate in Manalapan Township. Guidance from a seasoned estate planning attorney could help you understand how these designations work and ensure that you keep yours up to date and in line with your wishes.
Assets That May Require Designated Beneficiaries
For various reasons, certain types of assets generally are not distributed during the probate process, which must occur during the execution of a will. Generally, non-probate assets are those subject to preexisting contracts, including:
- 401(k)s and individual retirement accounts (IRAs)
- Bank accounts with payable-upon-death clauses
- Life insurance policies
Assets with more than one owner and assets that are specifically put into trusts by a testator are not subject to distribution through probate. Unless a testator expressly directs these types of assets to go to their estate, a beneficiary designation is typically required to ensure they are passed on to the testator’s desired beneficiaries.
The Dangers of Failing to Make and Update Beneficiary Designations
At first glance, making a beneficiary designation in addition to naming beneficiaries in a will may seem redundant, but the former often bears a lot more significance than the latter. In fact, if there is ever a conflict between the instructions in a will and a beneficiary designation, the beneficiary designation will take precedence over the terms of the will.
However, this priority order underscores the risk of failing to update beneficiary designations for non-probate assets. If a testator passes away with outdated designations, those designations will supersede their wishes laid out in their will. For example, if a bank account has a payable-upon-death clause that names a testator’s spouse as the designated beneficiary, but that spouse precedes the testator in death, the assets in that account would likely go to the spouse’s surviving family rather than the beneficiaries named in the testator’s will.
Even if distribution of non-probate assets defaults to the testator’s estate, there can be significant tax consequences that could have been avoided if those assets had gone to the testator’s intended beneficiary. While protracted legal intervention may be successful at eventually getting non-designated assets into the right hands, it could result in steep legal fees and notable depreciation in asset value. A local lawyer experienced in beneficiary designation could help an individual avoid these consequences.
Seek Further Guidance on Manalapan Township Beneficiary Designations from an Estate Planning Attorney
Making and updating beneficiary designations is generally not a complex process, but the consequences of not keeping them up to date can be catastrophic. Valuable assets may end up going to the wrong place, and you could end up putting your beneficiaries through a lot of stress trying to receive what you intended to give them.
Beneficiary designations are often an essential part of Manalapan Township estate planning, so be aware of them during your planning process. To learn more about the help an estate planning lawyer could provide with this and other aspects of your future plans, call today to schedule a consultation.