In the event of your untimely death, your beneficiaries are highly dependent on how you planned your estate.
Generally, you have two types of property. First, you have property with a title that says you own it. Second, you have property that has no title — you know you own it because you possess it. Property with title includes vehicles, boats, airplanes, real estate, bank accounts, savings bonds, life insurance policies, retirement accounts, and stock certificates. If you die without a will or a trust and haven’t used any beneficiary or transfer on death options, state law will determine who inherits property with a title. On the other hand, property without a title, such as jewelry, antiques, art, and even your digital assets are usually provided for in your will or trust, and if you don’t have one they typically will go to your heirs at law as a residual distribution (interpretation — stuff wars among your heirs). So just imagine that priceless diamond ring or your treasured coin collection going to that annoying niece or nephew that was always rude to you. Whoever is most persuasive or can argue the most get it. On the other hand, both Arizona and Utah have state statutes which allow you to prevent such “stuff wars” if you have a property drafted Will or Living Trust. As you can see, who you have listed as a beneficiary — or not having a beneficiary designation at all — can have serious implications for your family after you have passed away. So what are you preparing, or not preparing? Is it a well-organized plan or a big pot of spaghetti that is going to be symbolically dumped on your loved ones heads? You are in control. You decide.
Increasingly, a wide range of financial products allow you to name a beneficiary upon your passing. The benefit of naming a beneficiary is that the assets go directly to the named beneficiary upon the account owner’s passing, often bypassing the long and expensive process of probate. The danger is, however, that when these designations are not carefully coordinated with your estate plan you can inadvertently disinherit a loved one, cause a disabled family member to lose government benefits, leave your heirs with a massive tax bill, or otherwise fail to achieve your goals. However, remember that for such a beneficiary designation to work, you must be dead. What if you haven’t died, but are incapacitated? Then the beneficiary designations do not work because, as already stated, beneficiary designations only take effect only upon your death. However, if you have a Living Trust, you can be incapacitated and have someone of your own choosing take care of you and your assets.
What is a Beneficiary Designation?
Simply put, a beneficiary designation is a contractual agreement where the bank, insurance company, or financial company agrees to pay a person or entity, that you have selected, the specific assets upon your death. For example, Bob may list Susan, his sister, as the payable on death (POD) beneficiary for his savings account at ABC Bank. When Bob dies, ABC Bank will pay Susan the balance in Bob’s account, without Susan having to first go to probate court. Nice for Susan, not so nice for Bob. My advice — don’t depend on beneficiary designations — where possible put your assets into a Living Trust so that you can be protected while living.
Estate Planning Help
The best strategy for ensuring your wishes are carried out is to first understand the benefits and differences between having no controlling documents, or having a Will, or a Living Trust, and certain beneficiary designations. We are here to help you coordinate all of your assets and beneficiary designations with your estate plan so that you can protect the one’s you love.
Call today for a free consultation in office or by telephone.
Ben E. Connor, Esq.
The Connor Law Firm, PLC
Scottsdale, Arizona Office:
800-679-6709 (toll free)
St. George, Utah Office:
800-679-6709 (toll free)