In a previous post you learned of several probate avoidance tools. For example, you learned that revocable and irrevocable inter vivos trusts can avoid probate. A formal "beneficiary designation" is another great tool to avoid a probate procedure. So, what is a formal beneficiary designation?There are certain assets that pass outside of probate to individuals you name as your beneficiary of that asset (e.g., retirement accounts, life insurance, certain "Pay-on-Death" or "Transfer-on-Death" accounts). The financial institution holding that asset will have a form that you can complete to officially name that person or persons as your beneficiary(ies).
Without really thinking about it you have probably made formal designations in the past. For instance, some companies require that you re-enroll in company benefits each year such as survivor income benefits, supplemental life insurance, or accidental death and dismemberment benefits. There is usually an option to input a primary beneficiary(ies) and contingent beneficiary(ies). It's great that some companies require that you review and update this information each year. But what about those policies or accounts that you have left untouched for years and years? Do you know who is listed as your primary beneficiary? Did you even make a designation? This is something you should confirm as soon as possible. Why? Well, the person(s) you have listed as your primary beneficiary may not be the person(s) you wish to inherit that asset now. For example, your listed beneficiary is a parent, but you would like your spouse or children to be the beneficiary. Or, you never got around to completing the beneficiary designation form. If you do not have anyone listed as your beneficiary (or, your beneficiary predeceased you), then depending on the value of that asset, it may need to go through a formal probate proceeding. Thus, it is extremely important for you to (1) confirm who is listed as your beneficiary for these certain assets; and (2) make any necessary updates depending on your current circumstances.
If you have questions about this post or need assistance with updating your beneficiary designations, please contact the Law Office of Lauren Rios.
