Is There Such A Thing As A Wrong Beneficiary For A Non-Probate Asset?
One of the most fun parts of estate planning is that you can leave your property to anyone you choose. It is exhilarating to type drafts of your will that you know you will never formalize in which you leave your entire estate to a rescue shelter for sugar gliders or to your high school crush whom you have not seen in decades but who still sends you a Christmas card every year. Most far-fetched ideas about estate planning never make it to legally binding documents, because estate planning lawyers help their clients see the big picture before they formalize their decisions. They also advise clients to think beyond the will. Non-probate assets, the ones that do not become part of your estate when it goes to probate court, are an important part of your estate plan. You should put as much thought into choosing beneficiaries of your non-probate assets, such as trusts, life insurance policies, and transfer on death (TOD) bank accounts, as you do into choosing beneficiaries of your will. For help making wise decisions about life insurance policies and other non-probate assets, contact a Tampa estate planning lawyer.
Leaving Non-Probate Assets to Your Estate Defeats the Purpose of a Non-Probate Asset
One of the worst mistakes you can make with a non-probate asset is to designate your estate as a beneficiary. It is as bad as if you had not named a beneficiary at all. If the asset goes to your estate, it will be subject to the delays, disputes, taxes, and creditor claims that make people want to keep their assets out of probate.
Designating a non-probate asset, namely a trust, as a beneficiary of your will is not such a bad idea, though. Such a trust is called a testamentary trust. A will that leaves the entire estate to a testamentary trust is called a pour over will.
Minors Should Be Beneficiaries of Trusts, Not Life Insurance Policies
Establishing a trust, revocable or irrevocable, with your minor children or grandchildren as beneficiaries is a wise move. Naming them as beneficiaries of a life insurance policy is not, though. The only situation where you should designate your children as beneficiaries of a life insurance policy is if a family court policy orders you to secure your child support obligations with a life insurance policy.
If You Don’t Update Your Beneficiaries, the Insurance Money Will End Up in the Hands of Your Enemies
Naming family members as beneficiaries of non-probate assets is the best strategy, but you should review these periodically and change the beneficiaries if circumstances change. If you don’t, then your ex-spouse or your estranged sibling could end up inheriting your life insurance payout.
Contact David Toback About Non-Probate Assets
A Central Florida estate planning lawyer can help you get the most mileage out of non-probate assets. Contact David Toback in Tampa, Florida to set up a consultation.
Source:
wealthyaccountant.com/2024/12/09/never-name-as-beneficiary/
