Depending on your assets, estate planning can take on many forms. When it comes to things like life insurance policies and retirement accounts, beneficiary designations are an important consideration. The Balance explains what you need to know to prevent your estate from going into probate.
Even if you have a will in place, the information on your individual accounts will override your final wishes. As a result, it’s important to update beneficiary designations when you review your other estate planning documents. If you leave outdated information on your accounts, it could lead to your final wishes for your estate being ignored. That’s why it’s recommended that you review all documents after a major life change such as a new marriage or birth.
When filling in beneficiary designations, you must supply the name and what portion of the assets you wish to go to the beneficiary. You can also name a contingent beneficiary, which is a person who will receive these assets if the primary beneficiary dies. If you plan on leaving part of your estate to a minor, you may want to establish a trust. This allows you to establish specifications on how the assets are distributed, and who will manage them until the minor reaches legal age.
Lastly, you should also keep in mind estate taxes when creating your estate plan. While spouses are usually allowed to inherit assets without being taxed, this isn’t the case with funds coming from retirement accounts. Retirement assets are taxed and are often distributed according to specific rules. Estate tax may also be assessed when passing on assets to other heirs. Proper planning with an attorney can help mitigate estate tax and ensure your heirs aren’t unduly burdened.