Be sure to name and keep your beneficiaries up-to-date

Published Dec 31, 2017 at 9:00am

“What’s in a name?” — William Shakespeare

To answer Shakespeare, names are everything! Many people may not associate naming beneficiaries on insurance and financial documents as “estate planning” because it usually does not involve a visit with an attorney.

However, what is normally the easiest form of estate planning is often neglected entirely or is given inadequate attention.

Ideally you should review all of your assets with an estate planning attorney to ensure everything ends up as you intended and your assets are not tied up in a lengthy probate proceeding. Such a meeting should address your goals, concerns and provide options, such as a Medicaid Irrevocable Trust, to avoid having your hard earned assets lost to nursing home costs.  

Whether you are opening a new bank account, pension fund or meeting a personnel director when starting a new job, the following are general tips that could avoid delays, problems or conflicts over such assets after your death:

• Recognize that not all assets pass under a Will. All adults should at minimum have a Will in place. However, even with a Will there are often many assets that pass directly to named beneficiaries which are neither listed nor are distributed under a Will. The most common example is life insurance. If the individuals named as beneficiaries are all living, adults and there is no legal impediment to the distribution, the named individuals can generally follow the instructions of the particular insurance company and receive their monetary share directly without court intervention.  

• Review your Bank and Pension Accounts. In addition to life insurance, named beneficiaries should be in place for pension assets such as IRAs, 401ks, 403Bs, 457 plans, etc., as well as any CDs, money markets and even checking and savings accounts. Generally, the more diverse and varied your funds, the more you will benefit from having your situation reviewed by an estate attorney and/or a financial advisor to make sure your asset goals are met.

Generally, if you die with an account held only in your name with no beneficiary listed, those funds are subject to having to go through the probate or small estate proceeding process. The worst case scenario is having such accounts lost to the State as “unclaimed funds”. Considering that New York is currently holding over $15 billion in unclaimed funds, this is a horribly common oversight. If you do not have joint bank accounts, discuss with your bank the option of either adding a joint owner or, if that is an undesirable option, list beneficiaries on those accounts.

Name Both Primary and Contingent beneficiaries. The reality is that people die. While most people name their spouse or significant other as 100 percent primary beneficiary, often times people neglect to list contingent beneficiaries in the event that person dies or they neglect to update their beneficiaries upon divorce.  

• Be careful about naming minor children as beneficiaries. Yet another key reason to visit an estate planning attorney is to make sure proper language is in place to ensure your minor children (under age 18) are protected in the event of your sudden death.

If you die and minor children are listed as beneficiaries, and neither a trust nor a trustee is named to hold such funds on their behalf, generally an adult family member needs to come forward and seek court approval to be the trustee of those funds until the minors reach the age of consent. This can be a costly and timely proceeding and may lead to litigation if family members are in conflict over who will control the assets on behalf of your minor children.  

Also, 18 is a very young age for a person to inherit assets without any oversight or direction. A popular choice is for people (within their estate documents) to name a specific person to act as Trustee if such a situation occurs and to choose a minimum age of 25 or higher as the age of inheritance. This leads to the next point…

• A Trust you create can be a beneficiary. While this may seem confusing at first, generally if you are working with an estate planning attorney, he/she can advise you about the benefits of choosing this option. In short, if you have minor children, multiple beneficiaries and/or more complex planning within a trust, you can list a trust as either the owner or beneficiary of the account or policy to ensure the assets go to those persons and/or entities named in your trust.

A trust should clearly list your successor trustees who will be managing the assets after your death. This also frees you up to amend your trust as time goes by, usually without having to update all of your individual account forms.  

While this list only outlines some of the situations that may arise, the benefit of reviewing all of your accounts with an estate planning attorney more than pays for itself with the peace of mind and problems that can and will be avoided after your passing.

Here’s to a great holiday season and a happy and healthy New Year!

James S. Rizzo is an attorney with the law firm of Hilton Estate & Elder Law, LLC, with offices in Rome, Utica, Boonville and Lowville, NY. He has more than 21 years of legal experience and concentrates in Estate Planning matters, including Wills, Revocable and Irrevocable Trusts, Powers of Attorney, Health Care Proxies, Asset Protection, Nursing Home/Medicaid planning, Probate and related Litigation issues. He can be reached at 315-624-9600 or jsr@hiltonlawny.com for a confidential, free initial consultation. Visit us on the web at: www.hiltonlawny.com

Last Revised: Dec. 15, 2017