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How Do Death Beneficiary Forms Work?

Justin, My financial advisor has talked to me about the importance of keeping my accounts out of probate court. He said I can accomplish that using death beneficiary forms his company provides. Are there any details I should know about before going with that plan? – Jacob

Jacob, You’re right to be concerned about probate court, and your financial advisor was correct that death beneficiary designations can help you do that. But yes, there some details you should think through first.

The first thing to note is that you must do something with every one of your assets to stay out of probate court. Some people will put death beneficiary designations on their investments but fail to take steps to protect their real estate and their checking accounts. Those families wind up in probate despite the little bit of planning they did. You have to be thorough. We often recommend using a trust to help with this.

The second thing to note is that death beneficiary designations will direct funds straight into the hands of your beneficiaries. If you have young beneficiaries, disabled beneficiaries, or beneficiaries who otherwise don’t need funds directly in their hands, you should consider another option. A trust can assist with this problem as well.

One more thing that definitely deserves your attention is the difference between your qualified accounts and your non-qualified accounts. If that topic is confusing to you, you’re not alone. But it’s extremely important. The tax rules for qualified accounts—your IRA, 401k, and other retirement accounts—are very different. That difference can make a major impact on your estate plan.

We’d love to talk with you about these issues. Give us a call to set up a free strategy session. If you’d like to read more on these topics, order a copy of my book at YourPlanMatters.com. It’s called You Need A Plan: How to Prepare for Death, Taxes, and Long-Term Care. It could save you a ton of trouble and money.

Are you in a similar situation?

We can help you navigate your unique circumstance.

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