Estate Planning

Life Insurance Beneficiaries and Your Estate Plan

By admin

Creating a comprehensive estate plan is a great first step in planning for your future.  Unfortunantly many people stop thinking about their plan after the will and trusts are signed without considering the effect that their beneficiary designations of life insurance and investments have on their overall plan.

An example may be the easiest way to understand what I am talking about.  Lets say that you state in your will that your 401(k) should be used to fund a marital trust for your spouse.  This is all well and good but if you don’t have the necessary beneficiary designations on your 401(k) you likely won’t be able to accomplish your goals.  If you have your spouse listed as the primary beneficiary of your 401(k) and name your children as the secondary beneficiary, those assets will never reach your marital trust.  This is a huge problem since the marital trust is set up for tax purposes.  You will be incurring unecessary tax liability, which translates into less that reaches your loved ones.

Immediately after an estate plan is signed everyone should review their beneficiary designations and alter them to reflect their estate plan.  Using our example the owner of the assets should name the same people or trusts that are named in the wills for each appropriate asset.  Believe it or not you can name a trust created in a will as a beneficiary.  Even though such a trust only comes in to existence after the creator of the trust passes the companies that manage those retirement assets will accept that beneficiary designation. 

As a recap; signing a will and trust that implements your wishes, saves on taxes and takes care of your family is something everyone should have, but without the proper follow up such a comprehensive plan can be frusturated by not following up on your beneficiary designations.

To learn more about estate planning and the importance of beneficiary designations please contact an estate planning attorney.  I am always happy to meet and talk with anyone interested in taking control of their future.  I can be reached at (952) 356-6470 or by email at james@jtandersonlaw.com

Full post as published by Minnesota Estate Planning Blog on April 25, 2008 (boomark / email).