Have You Checked Your Beneficiary Designations Lately?

A lot of people think their estate planning is done just because they have created a Will or a Trust.

However, this is perhaps a misunderstanding of how certain accounts work. If you’re like most people, the bulk of your financial estate might lie in your retirement accounts and life insurance policies. Whether you have an employer sponsored retirement account (such as a 401(k) or 403(b)), your own IRA, a life insurance policy through work, or an individual stand-alone life insurance policy – all of these types of assets have one thing in common: BENEFICIARY DESIGNATIONS. These are assets that you own during your lifetime, but then you have the opportunity to direct the financial institution which holds the account or policy to pay those funds to a certain person, group of people, or an entity upon your passing. Beneficiary designations are an incredibly powerful tool, so it is imperative that you pay very close attention to them. You typically will name a primary beneficiary and a contingent (or secondary) beneficiary. The primary beneficiary will be entitled to receive the funds if they survive you; the contingent beneficiary will be entitled to receive the funds if the primary beneficiary has predeceased you. The funds from beneficiary designated accounts are (generally) transferred outside of the probate court system and are NOT governed by your Will or Trust – hence, you may not be done with your estate planning simply by putting one of those documents in place. Put another way, your beneficiary designations take precedence over beneficiaries named in a Will or Trust.

So what does that actually mean?

Let’s say you were married when you opened your retirement account and designated your spouse as your beneficiary. If you were to get divorced and never got around to changing the beneficiary and something happens to you, your ex-spouse is entitled to receive that money. No matter what your Will or Trust says. Let’s say you are married with minor children and named your spouse as your primary beneficiary and your minor children as your contingent beneficiary on your life insurance policy. If something happens to you and your spouse together, you have now directed a financial institution to pay money directly to a minor child – which they are not permitted to do. In that circumstance, those funds would end up in the probate court and the judge would appoint a financial conservator on behalf of the minor children to manage that money until they turned 18. This would happen regardless of whether you had a Will or a Trust in place and would not necessarily work harmoniously with what your Will or Trust said regarding how you prefer assets to be managed on your children’s behalf.

What other mistakes are typical when it comes to beneficiary designations?

Let’s say you recognized that you should not name a minor directly as a beneficiary on an account, but you wanted your children to still benefit from that account. So instead you chose to name a responsible adult with the expectation that when that adult received the proceeds they would take care of your minor children. Unfortunately, once those funds are paid to that adult, it is their money to do with what they want. Perhaps they would use the funds to support your children, but there is no requirement that they do so. Let’s say you have a special-needs loved one in your life and wanted to ensure that they were properly taken care of, so you named them as your beneficiary. Once they received the funds from that account, their eligibility for any governmental benefits that they might be receiving could be impacted. Additionally, if that loved one has a mental impairment, they may not be able to manage those assets on their own and may have to have a conservator appointed by the court on their behalf. Let’s say you named “your estate” as your beneficiary on your retirement account. This will ensure that the money in that account will go through probate before being distributed. Depending on your age when you pass away and other circumstances, you could be creating huge tax consequences for whoever inherits that money out of probate.

So, how should you name your beneficiaries? Here’s your typical “attorney answer” – it depends on your specific circumstances!

At Wills & Wellness, we take a holistic approach to your estate planning and make sure that your beneficiary designations will achieve what you want them to in light of your family, your assets, and your goals. Your Wills & Wellness estate planning attorney will always review your beneficiary designations as part of your planning to ensure that your entire estate plan is harmonious and will achieve your ultimate wishes at the end of the day. If you are interested in learning more about how we work with our clients and how we incorporate all angles and different types of accounts into our clients’ estate plans, click here to request more information or an appointment with one of our attorneys. http://ift.tt/1LOktA5

The following article Have You Checked Your Beneficiary Designations Lately? was originally published to http://ift.tt/1GYrgWo

How To Protect Your Assets From A Child’s Divorce

A child's wedding day is one of the happiest occasions in life for most parents, especially when they approve wholeheartedly of that child's choice of mate.

Sometimes, however, the choice is not always welcomed and parents become concerned about how to protect assets they plan to leave their children in case of a divorce. Or other times, there simply is concern that a child would leave everything—including an inheritance from parents—to a surviving spouse, who could turn around and leave it to a subsequent spouse, effectively cutting grandchildren out of the inheritance.

“Fortunately, there are several estate planning devices that allow parents to shield assets from those who marry, and may divorce, their children.”

• Revocable living trust. One of the most common ways to pass assets to children, a revocable living trust provides asset protection as long as what a child has inherited remains in trust. While assets are in trust, children benefit from the assets but are not the outright owners of the assets. The Trustee manages the assets for the child's benefit pursuant to terms the trust-maker has laid out in writing. As long as assets are not held in a child's name outright, it is not on the table to be divided up between spouses upon divorce.
• Irrevocable trust. Like a revocable living trust, an irrevocable trust provides similar asset protection, again as long as trust assets are not mixed with a child’s personal or marital funds. A trust is irrevocable when the trust-maker specifically says so in the trust document. Typically irrevocable trust planning is used to minimize or eliminate estate tax in the right circumstances.
• Preservation trust. This type of trust can be used to protect assets from a divorce by having your child place his or her assets into the trust and naming a beneficiary who is someone other than a spouse. This requires specialized planning and in some cases consent by the other spouse.
• Post-marital agreement. While many parents are unsuccessful in negotiating a prenuptial agreement before the wedding, they find it easier for children to accept the drafting of a post-nuptial or post-marital agreement later on to protect family assets. In either case, these agreements can establish clear ownership of various assets and who is permitted to inherit those assets or manage those assets in case a spouse becomes incapacitated or disabled. This is especially important in community property states, or if a couple who lives outside a community property estate owns real estate in a community property state.

How To Protect Your Assets From A Child’s Divorce is available on http://ift.tt/1GYrgWo

Estate Planning: An Unexpected Source of Total Wellness

 “Wellness is a connection of paths: knowledge and action.”

#1: Your mind is the epicenter of your health and well-being. It’s so crucial to try to live mindfully, meditate and maintain balance. Yet, worry still happens to everyone. An estate plan takes away worry about what would happen to your kids if something happened to you. Peace of mind this huge is something to consider as a gift to yourself and to your family. #2: Your body is a machine! But what if something beyond your control happened and you were unable to communicate. A legal document executed ahead of time, and just in case, can make a world of difference. By putting that one right person in charge, you can avoid family disagreements and help your family make swifter decisions for the benefit of your health. #3: Your family is what estate planning is all about. It’s not quite as much about you. Your Will or Trust helps those you leave behind know exactly what and how you would have wanted them to distribute your things, who should be in charge, and how you wanted to be memorialized. During times of grief, having instructions from you can really make a world of difference for your family. #4: Your finances are very important. By protecting them with a good estate plan, you can ensure that the right person manages any money you leave behind for the benefit of your children, your pets, or your favorite charity. Without proper planning, your children could get a large lump sum at a young age, your pets could end up in a shelter, and your favorite cause might never get a dime. Having a plan ensures that you have control over what you leave behind.

“What is your peace of mind worth?”

The following blog post Estate Planning: An Unexpected Source of Total Wellness was first published on http://ift.tt/1GYrgWo