![]() Within five years of the decedent’s date of death and taxable at the time of distribution.A lump sum which makes the entire retirement amount taxable at that time.In the case of an estate, there are only two options for distributions: Naming your estate as beneficiary for your retirement plan (and more)ĭistributions made to an estate go through probate and are more limiting than if you had named a spouse or non-spousal beneficiary. In the case of a retirement account without a specific named beneficiary, there could be some avoidable tax consequences. Not naming a beneficiaryīy not naming a beneficiary, you already know your assets will go through probate, but in the case of a retirement plan or life insurance company holding your assets, there may be contract provisions that designate a “default” beneficiary which may be inconsistent with your intended wishes. Next, let’s review some of the top mistakes made with beneficiary designations. Living or Revocable Trust: Assets transfer to beneficiaries privately, in accordance with the terms of the Trust.Beneficiary Designations: Typically used for retirement plans and life insurance policies whereby assets or death benefit proceeds will pass directly to the named beneficiaries (primary/contingent).Transfer on Death (“TOD”): Typically used for investment accounts and real estate, whereby the asset will be paid directly to named beneficiaries equally. ![]() Payable on Death (“POD”): Typically used for bank accounts and CDs whereby the account will be paid directly to named beneficiaries equally.Joint Tenancy: Assets transfer directly to named surviving owner(s).Estate: Same as Individual Name above through probate.Individual Name (with no designated beneficiary): Assets transfer through probate, then according to decedent’s last will, or, if no will, according to state intestate succession laws.Keep in mind that assets titled in the “individual name with no designated beneficiary” or “estate” will transfer through probate. Being cognizant of proper account titling allows you to avoid probate and transfer assets directly to your named beneficiaries, since these assets will transfer outside of your will.īelow is a quick recap of primary titling options and how assets will transfer upon death when titled in a particular way. Once a will is filed with the probate court, it becomes a public document, unless the court orders otherwise. Probate is neither good nor bad, but it’s not private and is an additional legal process that costs time and money when settling an estate and transferring property to your heirs. How your accounts are titled will determine whether or not they go through probate upon your death. Because these direct beneficiary designations supersede a will, they need to be carefully reviewed and coordinated with an estate plan. Along the way, we have opened multiple bank, investment, and retirement accounts that have asked us to name beneficiaries directly for each account. Many of us have spent years working and accumulating assets. WASHINGTON - As I was boarding a recent flight with my husband, I had a sudden pang: If something happened to us, was I sure that the beneficiaries we had designated to receive our assets were up-to-date? Were our assets titled correctly, and had anything changed since the last time we reviewed them?Įven financial advisers can have these nagging questions because things happen in life that can cause decisions we made in the past to change.Ĭertainly after any major life change, such as a marriage, divorce, birth of a child, or death of a spouse, you should review your beneficiary designations.īut it’s a good practice to review them on a more regular basis, too. Business & Finance Click to expand menu.
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