It has become a common practice to list beneficiaries on assets as a means of avoiding probate and to avoid the necessity of setting up a revocable living trust to hold or collect your assets. Having accounts payable on death (POD) or transferable on death (TOD) is a common suggestion for probate avoidance. Although this works in most cases, it can cause problems if those beneficiary designations are not kept up to date. A death or divorce in the family, as to the designated beneficiary, can cause problems on how the account is paid out after death. Beneficiary designations control to whom that property is distributed even though the terms of an individual’s will or revocable trust direct otherwise.
Although most institutions accept beneficiary designations, such as life insurance companies, pension plans, brokerage accounts and bank accounts, sometimes these institutions have their own set forms for directing the pay out to beneficiaries. Some have their own directions of what happens should a named beneficiary predecease you. It pays if you are going to use a beneficiary designation to check out with the institution what happens, what is the default, if a beneficiary were to predecease you. Do you want those assets then paid to the beneficiary’s heirs or lineal descendants, or do you want the beneficiary designation to terminate and the asset to be controlled by your general estate, that is, by your will or trust.
It is best to seek the help of an estate planning professional to review with you your beneficiary designations if you decide to have beneficiary designations on some or all of your assets. This should be part of a comprehensive estate plan where how you own, hold and designate payment and transfer of assets after your death is fully reviewed.
Submitted by:
Attorney Wyon F. Wiegratz
Remley Law, S.C.
