The Art and Science of Beneficiary Designations By Chris Miller, Esq.

Part of estate planning is having a well-drafted Will signed and ready to-use. Just as important, though, a good estate plan makes sure that beneficiary designations are in place and up-to-date.    The reason is that a Will only controls assets that are owned by an individual when they pass away that are NOT designated to a beneficiary.   Old beneficiary designations and hastily completed forms can have serious consequences on how assets get distributed when a person passes away.

   Name adults or Trusts as beneficiaries.   One common pitfall we see is people naming minor children as beneficiaries of life insurance policies or retirement accounts.  This is a problem because when a minor is put in the place of owning assets in his or her own name, then the Probate Court will require a conservatorship.  A conservatorship is a court-supervised account that cannot be accessed without court permission and then is distributed to a child on his or her 18th birthday, whether the child is ready to manage those funds or not.  A Trust can be created inside of a Will or in a separate document to let a named Trustee manage the funds for a minor and follow specific instructions about how and when to distribute the funds to their intended beneficiary.

 Name contingent beneficiaries. Another mistake that people make is to name a primary beneficiary on their accounts and then leave the contingent beneficiary designation blank.   We find this especially true when clients are married without children.  A contingent beneficiary is a person (or people) who stand next in line to receive assets after the death of an account holder if the primary beneficiary is not alive.   If no contingent beneficiary is named, then those assets often fall back into the probate estate of the decedent, and get distributed as part of a Will’s directions, or to the closest living relatives of a decedent.

Name new beneficiaries as life events unfold.  People who have second and third children should pay attention to the beneficiaries they have designated, because beneficiary designations do not automatically include subsequent children.   Likewise, beneficiary designations should be updated after a marriage or a divorce, because Georgia law tries to interpret your wishes about how your estate distributions should be impacted, but Georgia law does not yet automatically revoke or change beneficiary designations that apply to bank accounts flowing outside of probate.

 

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