One aspect of estate planning that can easily be overlooked or underestimated is the importance of beneficiary designations. These seemingly mundane choices can profoundly impact the distribution of your assets after your passing.
A beneficiary designation specifies who will receive your assets upon your demise. These designations can ensure a swift and efficient transfer of assets.
The power of beneficiary designations
One of the key benefits of beneficiary designations is the streamlined distribution of your assets. When you designate beneficiaries for your accounts or policies, these assets pass directly to the named individuals or entities. This allows your loved ones to access their inheritance without enduring the probate’s bureaucracy.
Additionally, beneficiary designations offer privacy, unlike wills, which become public records during probate. Your decisions regarding asset distribution remain confidential, shielded from the prying eyes of curious onlookers. This can be especially important for those who wish to keep their financial affairs discreet.
Common types of beneficiary designations
When considering beneficiary designations, there are several common types to keep in mind. The primary beneficiary is the first in line to receive your assets upon your passing. Remember, you can name multiple primary beneficiaries and designate the percentage each should receive.
When designating beneficiaries, you may encounter terms like “per stirpes” and “per capita.” Per stirpes means that if a primary beneficiary predeceases you, their share passes to their descendants (usually children). In contrast, per capita means that if a primary beneficiary predeceases you, their share is divided equally among the surviving primary beneficiaries.
The decisions you make regarding beneficiary designations are far from trivial because they can significantly impact the financial security of your loved ones. To help ensure you make the right choices, consider seeking guidance from a legal professional who can provide insights into the legal implications of your choices and help you make informed decisions.