Over one-third of Americans face family conflict when someone dies without an estate plan. Despite the perceived importance of estate plans, Caring.com’s 2023 Wills Survey reflects only a third of people have one.

While most adults in the United States think all they need for an estate plan is a will, a comprehensive and effective estate plan involves more than simply making a will. An essential but frequently ignored aspect of estate planning involves examining assets like 401(k)s, pensions, and savings accounts, and ensuring each has a designated beneficiary.

Avoiding Probate

Choosing beneficiaries for your assets can help your loved ones receive those assets directly, avoiding the probate process – which involves court oversight of the asset distribution. Avoiding probate has several benefits for your loved ones:

• Cost savings: Probate costs can use up to 10% of an estate.  (source:  Legal Zoom)
• Time savings: Probate can be time-consuming, taking months to years in some states.
• Ensuring your wishes: Designating beneficiaries helps ensure that your wishes are followed, preventing challenges to the validity of your will.

It’s crucial to select recipients for each asset, as failing to designate beneficiaries can subject your assets to probate, possibly leading to unintended recipients. Regularly reviewing and updating your beneficiary designations provides an extra layer of protection to ensure your loved ones receive what you intend to pass on to them.

Designate Beneficiaries for Your Assets

When planning your estate, review your assets and confirm you’ve designated beneficiaries. Make sure your choices are current. For the listed assets below, ensure the desired individuals are named as beneficiaries:

• Retirement accounts: Review beneficiary designations for all types, including traditional IRAs, Roth IRAs, SEP IRAs, and SIMPLE IRAs.
• Annuities: Ensure you’ve designated one or multiple beneficiaries for regular payments.
• Pension Plans: Check if lump sum payments are available for named surviving loved ones.
• Bank Accounts: Verify beneficiaries for pay-on-death or transfer-on-death accounts, different from joint accounts.
• Investment Accounts: Transferable to a recipient upon the owner’s death.
• Health savings Accounts: Contact your HSA provider for necessary forms to transfer.
• Life Insurance Policies: Review and update beneficiaries, especially after life changes like divorce or death.
• House: Create a transfer-on-death deed to bypass probate or title your home in a trust.
• Car: Certain states allow naming transfer-on-death beneficiaries.
• Business Interests: Review partnership, shareholder, or operating agreements for transfer provisions.
• Digital Assets: Some platforms enable assigning someone to manage digital accounts post-death.

Multiple Beneficiaries and Successors

When designating beneficiaries, it’s common to name multiple individuals, like splitting an asset between two children. You can specify each beneficiary’s share depending on the asset type. Additionally, it’s crucial to include successor beneficiaries who inherit the asset if the original recipient dies. For example, setting both a beneficiary and a successor for a pay-on-death account ensures smooth asset transfer in case of unforeseen events.

Changing Beneficiaries

As your relationships and circumstances change, you have the flexibility to update your designated beneficiaries on assets like accounts. Beneficiaries gain ownership only after your passing, without any ownership interest while you are alive and capable of managing your affairs.

Planning for the future and organizing your assets can be complex, but an estate planning attorney can assist you in developing a solid plan to distribute your assets according to your wishes.  To embark on the journey of creating a comprehensive estate plan tailored to your needs, consider scheduling a strategy session with us.