When you decide to put an estate plan together, you must begin with a Last Will and Testament. This process requires careful thought and attention. One crucial decision to make while putting together your will is selecting your beneficiaries.
Within a Last Will and Testament, a beneficiary is any party who receives a portion of the testator’s estate. A beneficiary can be a person or an organization. In your role of creating the will, you can choose to distribute your estate however and to whomever you choose. The only condition is the beneficiary you choose must still be alive.
Choosing your desired beneficiaries is the first part of your will process. You must include this information in your Last Will and Testament. Inputting the information incorrectly can lead to added complications and disputes during probate.
You must use the full legal name of each intended beneficiary (person) with no nicknames or abbreviations. You should also include suffixes (Sr, Jr, roman numerals). If there are two beneficiaries with similar names, you may choose to add distinguishing information to avoid potential confusion.
You should also be clear with the name of any organization as a beneficiaryCreating Your Custom Will Online. You may need to include the organization’s location and a point of contact. Since you will not be present to clear up any misunderstandings, a good rule-of-thumb is that too much information is better than not enough.
If you are married, you may choose your spouse as your primary and sole beneficiary in your will. This is not required by law in any way. You should be aware, however, your spouse does have some legal claims to your estate already. The law states that your spouse is the automatic beneficiary of any 401K and pension accounts.
Understanding the law, especially in relation to your estate and designated beneficiaries, is necessary. Otherwise, you could end up with a legally invalid will.
The following states are known as “community property states,” which means all assets gained, earned, or bought while married are considered the property of both spouses:
The rest of the US states are known as “common law” states. This means the assets gained while married are considered the property of that specific spouse. In other words, unless otherwise noted in documentation, the property you purchased while married is only considered to be yours.
You are legally allowed to leave assets to your children even if they are considered minors. However, a minor cannot directly receive the estate until they are an adult. The assets or property will be managed by the child’s legal guardian. You may also choose to create a trust for your child’s inheritance. The appointed trustee would manage the assets until the minor is a legal adult.
You may also choose to distribute part of your estate to an organization (i.e. nonprofit, church, etc). Depending on the gift’s dollar amount, you may need to check with an estate attorney regarding any potential tax requirements. You may also want to leave additional instructions to your executor of how to carry out your wishes when distributing these gifts.
It may seem a bit cold to choose alternates for your beneficiaries, but this is a responsible move to ensure your estate is handled correctly in any situation. You may decide to make your spouse the sole beneficiary of your estate, but what happens if they die before you? What if you both die at the same time? Even your Last Will and Testament may need a back-up plan.
If you either opt-out of choosing any beneficiaries or you don’t create a will, the probate court will step in and decide what to do with your estate. Generally, the closest relatives receive most of your assets and property.
If you don’t want to add more complications for your loved ones after you die, you should take the time to create a Last Will and Testament and choose beneficiaries for your estate.