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  • Writer's picturePortland Elder Care Council

PECC July Blog | Designating a Beneficiary

Designating a beneficiary is a simple and easy thing to do, but it can have a big impact on the distribution of your assets after your death. Reviewing your beneficiary designations periodically is important to ensure they are still up-to-date. For more information, continue to scroll down as we discuss the importance of designating a beneficiary.



Why You Should Designate Beneficiaries


According to WealthCounsel, over a third of Americans have experienced or witnessed familial conflict when someone dies without an estate plan. While most people believe having an estate plan is important, only a third have a plan in place, per Caring.com’s 2023 Wills Survey.


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.


A crucial yet often overlooked component of estate planning is reviewing assets, such as 401(k)s, pensions, and savings accounts, and ensuring you have listed a beneficiary for each of these.


Avoiding Probate

Designating beneficiaries often allows your assets to go directly to your loved ones without going through probate. In probate, the court will have to oversee the distribution of assets in an estate.

Avoiding probate by naming beneficiaries can help your loved ones in several ways.

  • It saves money. Costs associated with the probate process can consume up to 10 percent of an estate, per Legal Zoom.

  • It saves time. The probate process can also be time-consuming in certain states, taking months to years to complete.

  • Naming beneficiaries helps ensure your wishes are carried out. Even if you have a will, individuals might contest it, challenging its validity.

Selecting recipients for individual assets is essential because if you do not designate reviewing your assets and ensuring you have your loved ones listed as beneficiaries gives an extra layer of protection that they will receive what you envision passing on to them.


Ensure You Have Designated Beneficiaries for These Assets

As part of creating your estate plan, you should assess your assets and ensure you have listed beneficiaries and that your selections are up to date.


If you have any of the following, check to ensure you have the person or persons you want to receive the assets listed as beneficiaries.

  • Retirement accounts – Besides traditional IRAs and Roth IRAs, there are other types of IRAs, such as SEP and SIMPLE IRAs. Reviewing the beneficiary designations on all types of retirement accounts is essential.

  • Annuities – Annuities provide regular payments to individuals over time, typically as a source of retirement income. Most plans allow you to select one or multiple beneficiaries.

  • Pension Plans – If you pass away before retirement, some pension plans provide lump-sum payments to named surviving loved ones.

  • Bank accounts – Pay-on-death or transfer-on-death bank accounts allow you to list beneficiaries who assume ownership of your account after you pass away. This differs from a joint account, where you and another person own the assets. In a pay-on-death account, your beneficiary takes ownership after you pass. You can add and change beneficiaries directly through your financial institution.

  • Investment accounts Like other financial accounts, investment accounts can be transferred to a recipient upon the owner’s death.

  • Health savings accounts You can obtain the necessary form to transfer your health savings account by contacting your HSA provider or visiting their website.

  • Life insurance policies – Those with life insurance policies typically select who will receive the payment when they establish their policy. However, policyholders should remember to review and update their plans when circumstances change, such as after a divorce or death.

  • House – When creating a transfer-on-death deed, you can bypass probate and transfer your house upon death. This can be a safer option for older adults than adding someone to the deed, as it preserves their full ownership of the property until death. Do not do this without consulting an attorney.

  • Car Certain states allow people to name a transfer-on-death beneficiary for their vehicles.

  • Business Interests – If you own a business, be sure to review partnership agreements, shareholder agreements, or operating agreements for transfer provisions.

  • Digital Assets – Some online platforms allow you to assign someone to manage your digital accounts after death.

Multiple Beneficiaries and Successors

In many cases, you may name more than one beneficiary. For instance, a person with two children might want to leave an asset to them both. Depending on the type of asset, you can state how much of the asset each child receives.


It is also vital to consider successor beneficiaries. A successor obtains the asset if the original recipient passes away. For instance, you could list a beneficiary and a successor on a pay-on-death account.


Changing Beneficiaries

You can change whom you listed as a beneficiary as your relationships and circumstances evolve. When you designate a beneficiary on an asset such as an account, they assume ownership only after you die. Generally, they will not have an ownership interest while you are alive and can handle your own affairs.


Estate Planning Attorney

Organizing your assets to plan for the future can be challenging and complex. With the help of your estate planning attorney, you can develop a solid plan to distribute your assets to your loved ones according to your wishes.


Contributed by Jennifer Trundy of Rose Elder Law, LLC.

 

Community Events


Rose Elder Law Events & Free Seminars

July Events | Online & In-Person


We offer seminars throughout the Portland Metropolitan area and, on special request, throughout Oregon. Topics we discuss include: Planning for Incapacity, Protecting Your Family in 2023, Estate Planning 101, You Can Afford Long-Term Care, and more. Click the link below for the full calendar and events.


Medicare Plans 2023

Thursday, September 21, 11 am- 12 pm | Lake Oswego Senior Center


Learn about the new Medicare Plans that are available this year before open enrollment.


 


Thanks for Reading


Let us know if you have any questions or suggestions on topics you want to see! We would love to hear from you. Don't forget to check out our events page for our next webinar or in-person event.





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