Natalie Spiwak January 16, 2018 at 3:58 PM

Are you sure you know who your beneficiaries are?

Building assets for retirement may seem like challenge enough, but designating beneficiaries to inherit those assets can bring an entirely new set of considerations into the mix. While it may seem simple to use the first name that comes to mind (a spouse, a child or a sibling) in your trust, you should know the ramifications first.

When leaving assets to individuals, an often-asked question is how the assets will be distributed if that person predeceases you?  In this situation, assets can be distributed to the beneficiaries’ children or redistributed to other named beneficiaries. 

Sometimes, individuals name charities as beneficiaries.  An important point to consider if this is your choice, is the purpose of the donation.  Do you want the monies used for a particular program within the organization or do you want the funds used as the charity sees fit?  You may also want to consider how you would like the money distributed if the particular charity you have chosen is not in existence at the time of your death or the charity does not qualify as a 501(c)(3). Inserting specific verbiage to this affect in your trust will help. For example, you can state that the assets originally slated for a charity can be re-distributed to another charity or instructions left to the trustee to donate these assets to an organization which has a similar purpose and mission. It is crucial to properly identify the charity.  The exact name of the charity, address, phone number, website, and tax ID number should be provided so there are no confusions regarding your intended recipient.  Many groups have similar names and missions, so it is imperative to leave sufficient identifying information.

Review your named primary and contingent beneficiaries on your life insurance, 401(k)s, IRAs, and annuities, and ensure that these named beneficiaries represent your who you initially had in mind to leave your assets to.  It is important to coordinate the named beneficiaries in your living trust and will with the named beneficiaries on these other types of accounts.

It is possible to leave specific monetary amounts to named beneficiaries, yet it’s key to remember that these specific amounts will be paid first, after the taxes and debts have been paid.  So, if you are planning to use specific dollar amounts, you will want to carefully consider the amount of assets in your estate and ensure that these monies will be available.  Another option is to leave specific percentages to individuals and if you plan on leaving a bequest to minors, you may want to consider staggering his or her distribution.  This means that he or she receives various percentages, at different ages, instead of a lump sum all at once.  You can set whatever percentage or age that you wish, however, there is typically a provision which allows earlier distributions for health, education, maintenance and support.

While there are many matters to consider when choosing beneficiaries, it just takes a bit of planning to ensure that your assets are distributed to the right beneficiaries and in the manner that you wish.


Natalie Spiwak

Natalie Spiwak is the CEO and Founder of Affinity Trusts.  Affinity Trusts aligns with the leading estate planning law firm, Citadel Law Corporation, to provide SAFE Credit Union members a complete range of advanced estate planning services. By providing accessible seminars, and engaging in personal dialogue with clients about estate planning, Affinity Trusts serves the life-planning needs of many with a high level of passion, expertise and integrity.  When not busy with her clients, Natalie loves spending time with her two young children and because she also has a degree in archeology, loves traveling the world!