People can name the person they would like to be beneficiary on a variety of accounts and financial devices. This is advantageous because the assets that have a named beneficiary transfer outside of probate, saving heirs time and money. However, many people forget that a beneficiary designation on many documents will override their will.
A recent article urges people to use caution when designating beneficiaries for various accounts. People may name individuals, charities, trusts, their estate, or private organizations as the beneficiary to their account. People may also choose not to name a beneficiary, in which case their will determines the distribution of the account.
It is also important to review beneficiary designations every five years, as well as after certain trigger events. According to elder law attorney Andrew Hook, “Key times to review your beneficiaries include after a marriage or divorce and after the birth or death of a close family member. Rollovers and conversions of retirement accounts are also important events, because beneficiary designations generally won’t carry over from your old account to your new one.”
The article also warns against naming minors as beneficiary to accounts. When minors are named beneficiaries, a court will typically appoint a custodian to manage and distribute the funds until the minor reaches the age of majority. This arrangement can be expensive, depending on the age of the minor.
