Estate planning is often not as simple as just writing a will. Assets like retirement accounts, annuities and life insurance pass to heirs through a beneficiary designation. Here are some things Florida residents may need to know about beneficiary designations.
Retirement accounts like IRAs, 401(k)s and 403bs all use beneficiary designations, and many people fail to name beneficiaries on these accounts and life insurance policies. When not filling out the proper forms to name who gets these assets, there are default rules for transferring these accounts. Life insurance benefits generally become part of one’s probate estate.
When one is married, retirement assets usually go to a spouse if there is no listed beneficiary. If not married, retirement accounts will also go to a probate estate. Retirement assets must be given to the estate within five years, which requires paying deferred income tax sooner.
While it may seem obvious to some, it is important to list the correct beneficiary on any applicable forms. A person’s legal name should be used to avoid confusion, and a grantor could need to take extra caution to list the right person when relatives have similar names. Litigation could take place if a beneficiary designation is unclear while using a name different from an heir’s legal name could delay payouts.
Instead of directly giving assets to an intended recipient, one may need to create a trust for this person. Trusts can be named as beneficiaries, and this might be necessary when a beneficiary is a minor or has special needs.
The estate administration & probate process can be complex, and a family’s needs may change over time as relatives grow up, have children and pass away. One might wish to consult an attorney who can help one review estate planning documents and verify that they are up to date.