banner-image

Beneficiary Designations in DC Estate Planning

A beneficiary designation is an agreement with a financial institution to pay an account holder’s assets upon their death to a named individual, trust or organization. For example, life insurance policies often have a beneficiary designation that often includes the insured’s spouse, children, grandchildren, or even trust for their spouse, children, and grandchildren.

Generally, assets that pass by beneficiary designation pass outside the terms of the last will and testament or trust, so it’s important to make sure that they are coordinated with the estate planning documents. This ensures there is enough liquidity in the estate to pay for taxes or administrative expenses and also ensures that the person is not de-seeding the purpose of their estate plan by naming unintended beneficiaries.

For more information about beneficiary designations and how they factor into the estate planning process, call and schedule a consultation with a Washington, DC estate planning lawyer.

Beneficiary Designations & Retirement Accounts

Retirement accounts are typically left or passed on by beneficiary designation. For retirement accounts, specifically, it’s important to understand whether the retirement accounts are tax deferred accounts. If that’s the case, a person may want to review their beneficiary designations to ensure that they are not at risk for accelerating taxation upon their death.

It is important to review beneficiary designations for a person’s retirement account to ensure that they are coordinated with the overall estate plan. Generally speaking, a retirement account is passed pursuant to the terms of what an account holder expresses in their beneficiary designation. When selecting beneficiaries, it is also important to consider individuals’ citizenship.

Impact of DC Estate Planning Process on Beneficiary Designations

The impact of a beneficiary designation is typically when items left by beneficiary designation do not pass through or are not governed by the terms of the last will and testament or a individual’s trust. To ensure that your estate plan is implemented correctly, an individual must review and coordinate those beneficiary designations.

The type of assets the beneficiary designation is for is also important. For example, a person may choose for their retirement beneficiary to be a living person so that the income taxes can continue to be deferred during the lifetime of the living person rather than forcing the acceleration of the taxes at their death by giving it to an entity or a trust that’s not been created to accept that type of asset.

How an Attorney Can Help

An estate planner can assist a person with reviewing their beneficiary designations so that they are coordinated with an overall estate plan. If beneficiary designations are not coordinated with the overall estate plan, it may result in an illiquid estate or having unintended beneficiaries.

A person can change their beneficiary designations during their lifetime while they maintain the capacity to do so. An estate planner can also help someone collect their beneficiary designations. In the event that brokerage houses and financial institutions merge or change, some of these beneficiary designations may get lost. It’s always good to have a place where the entire set or entire copy of beneficiary designations.

An attorney can assist clients with reviewing their beneficiary designations and coordinating them to fit with the overall estate plan. An attorney can review them in conjunction with the initial estate planning and can assist their client throughout their lifetime as they create new accounts or change their designations to make sure they comply with their overall estate plan.