Beneficiary Designations and Estate Planning

Stephen Cockriel Oct. 31, 2016

California residents should make certain that their estate plan is up to date in regards to their choices of beneficiaries. A number of accounts pass assets on by beneficiary designation. These may include retirement plans, bank accounts, insurance policies and other vehicles. One advantage of using beneficiary designations is that the assets do not have to go through the probate process. and this means they are more efficiently distributed to beneficiaries.

However, people often forget about their beneficiary designations when they are preparing a will, and these designations trump whatever is in the will. The result could be that there are not enough assets to carry out the testator's wishes.

A number of other complications may arise. People may fail to update beneficiary designations after a divorce or following another change. If a beneficiary on an IRA is a deceased spouse, then the assets will not automatically pass to the children. Instead, it will go to the estate. As a result, when people are working with a professional on estate planning, they should be careful to coordinate the will and other documents with beneficiary designations. They should also regularly review those designations along with their estate plan periodically or after changes in the family.

People might want to discuss their overall plan for their assets with an attorney. Wills, trusts and other accounts can be designed so that they complement rather than contradict one another. An attorney might be able to suggest other strategies as well. For example, people might want to put most of their assets into trusts, but they can also create what is known as a "pour-over" will. This places any remaining assets into a trust at the person's death.