Alternate Beneficiary, Assets, Beneficiaries, Designated Beneficiaries, Divorce, estate, Estate Plan, Estate Size, Life Circumstances, Marital Status, Married With Children, Primary Beneficiary, Residuary Beneficiaries, Single Never Married, Unintended Consequences, Will
Another important step in building your estate plan is choosing your beneficiaries. As mentioned in the article How Estate Size Will Influence Your Estate Plan, the estate size will influence the size of your beneficiary pool. Accordingly, along with estate size, here are a few more basic considerations for choosing your beneficiaries:
- Consider your marital status.
- Designated beneficiaries on assets.
- Using additional types of beneficiaries along with the primary beneficiary.
Although there are many intricate considerations concerning beneficiaries, these basic considerations are more typical of a common estate.
Consider Your Marital Status
While building your estate plan, you should consider your marital status before choosing your beneficiaries. The marital status may influence both the choice of your beneficiaries and your overall estate plan. So, consider the following based on your marital status:
- If your marital status is single and never married, you should consider using alternate beneficiaries for your primary beneficiaries. If a beneficiary predeceases you, then the alternate beneficiary will receive the property instead. Basically, this will avoid multiple updates to the estate plan based on changes with beneficiaries.
- When married with children, this may be as simple as a single person. However, minor children can only inherit a limited amount of property. Therefore, consider adding beneficiaries to control the property until the children are of age. Additionally, you should consider appointing guardians for the children in the event tragedy occurs to you and your spouse.
- Divorce can make choosing your beneficiaries more complex. Concerning divorce, an ex-spouse may be able to claim property in your estate which could abate your intended beneficiaries. To avoid such an occurrence, you may need more elaborate estate planning. Additionally, if the estate involves children from the dissolved marriage, the planning becomes even more challenging. Unfortunately, divorce can complicate the process of choosing your beneficiaries as well as influence your overall estate plan. As a result, you should consider hiring an estate attorney to build your estate plan.
The marital status is a key component of life circumstances that can complicate your estate plan. Therefore, careful consideration of your marital status is necessary in choosing your beneficiaries.
Designated Beneficiaries on Assets
When choosing your beneficiaries, carefully consider where to list them. If you designate a beneficiary on an asset, avoid listing the beneficiary in the will for the same asset. As explained in the article List Your Beneficiaries Wisely in Your Estate Plan, a beneficiary listed on an asset supersedes a beneficiary listed in a will. Therefore, to avoid problems, avoid listing assets with designated beneficiaries in the will, if possible. Since assets with designated beneficiaries are not part of the estate, listing them in the will can cause problems.
Use Additional Types of Beneficiaries
In your estate plan, consider using multiple types of beneficiaries to compliment your primary beneficiaries. Typically, if a primary beneficiary dies with no alternate beneficiary, the property defaults to the estate. So, to avoid property defaulting to the estate, consider using alternate beneficiaries or residuary beneficiaries.
While choosing your beneficiaries, if you choose beneficiaries older than you, consider using additional types of beneficiaries as listed in the article Common Types of Beneficiaries in an Estate.
A Final Word about Choosing Your Beneficiaries
The process of choosing your beneficiaries requires more thought than just listing names on a will or a living trust. Typically in many estates, life circumstances has an effect on choosing your beneficiaries. Regardless of whether you are wealthy, poor, or something in between, these factors need consideration. In many instances, you will need to add more beneficiaries than you originally thought. Therefore, you should take the time to consider your life circumstances as well as those of your beneficiaries. In the end, you will have an estate plan that will avoid unintended circumstances.
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Plan Your Estate– Plan Your Estate by Nolo explains more deeply the complicated aspects of choosing your beneficiaries.