Estate Planning & Living Trusts

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26. Plan #5: Beneficiary Transfers

Estate "plan" #5 is transferring assets through beneficiary designations.

Many assets -- including insurance policies, IRAs, retirement plans and some bank accounts -- let you name a beneficiary. And when you die, these assets will usually be paid directly to the persons you have named as your beneficiaries, without probate -- but not always.

If your beneficiary is incapacitated when you die, the court will probably take control of the funds for that person.

If your beneficiary dies before you, or you both die at the same time, the asset will have to go through probate so it can be distributed with the rest of your estate.

If you list "my estate" as beneficiary, the probate court will have to determine who "my estate" is.

And if you list a minor child or grandchild as a beneficiary, the court will probably get involved to "protect the child's interests," even if the child's parents are living. That's because insurance and financial companies will not knowingly pay large sums of money to a minor.

 

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