Menu
The Forgotten Step in Estate Planning: Beneficiary Designations
March 6th, 2018
Individuals often believe that a last will and testament is sufficient estate planning. However, a complete estate plan includes a last will and testament and planning for incapacity with a financial power of attorney and an advance health care directive. In some cases, a revocable living trust will also be included in the estate plan. Although executing these estate planning documents is a key part of estate planning, it is not the end of the process. There is a final, underrated, and forgotten step in the estate planning process: beneficiary designations.
[i] For additional information regarding the difference between probate and non-probate assets, please see https://www.maineelderlaw.com/articles/probabte-vs-nonprobate-property/.
- Non-Probate Assets
- Individual retirement accounts (IRAs)
- 401(k) plans
- Annuities
- Life insurance policies
- Bank accounts or investment accounts with transfer on death (TOD) and payable on death (POD) designations
- Adverse Consequences of Not Updating Beneficiary Designations
- First, the two bank accounts were the only asset Mrs. Client owned with no beneficiary designation. Therefore, the money in the bank accounts was distributed pursuant to Mrs. Client’s will to all three children.
- The investment account, on the other hand, had a payable on death (POD) designation. Mr. and Mrs. Client had designated a beneficiary when the account was initially funded and before Mr. and Mrs. Client had any children. Since Mrs. Client did not change the beneficiary designation when she was working on her estate plan, the investment account was distributed to Mr. Client’s brother after her death.
- Client had intended the life insurance proceeds to be used for her funeral and burial expenses. Mrs. Client had designated her husband as the primary beneficiary and then her oldest child as the contingent, or backup, beneficiary. Because Mr. Client was deceased, the oldest child received the life insurance proceeds; however, she is not required by law to use the funds as Mrs. Client intended.
- Finally, Mrs. Client had named her husband as the primary beneficiary of her IRA. She did not designate a contingent beneficiary though. Mrs. Client’s IRA became payable to her estate and was controlled by her will. Unfortunately, a retirement account made payable to an estate loses tax advantages that can be preserved when naming an individual.
- Naming Beneficiaries

Categories: Uncategorized