One important step in estate planning is naming specific beneficiaries to inherit your assets. Beneficiary designations will be needed, not only for life insurance policies, but for wills, trusts, and retirement plans and annuities. It’s wise to name each beneficiary individually, rather than as a category, such as “my children” or “my grandchildren”. One way “categories” can be useful is in naming “per stirpes” contingent beneficiaries. If you have children, and want to ensure that if a child dies his or her children take that child’s inheritance, this Latin phrase ensures that the deceased child’s share will be divided among the living children of the deceased child and the descendants of any deceased child of that deceased child.
In naming family members to inherit your wealth, there are three important concerns which can cause things to “go wrong”, resulting in outcomes other than what you intended:
- unwise (or influenced) decisions by the beneficiary
Big, bad #1: creditors:
An important consideration in naming beneficiaries is protecting your assets against your beneficiary’s creditors. Your child or grandchild may always have been responsible about their financial affairs, but there’s no telling what future job or health reversals may force them into debt. You want the inheritance you’ve chose to give them to remain intact.
Big, bad #2: divorce:
In naming a child or grandchild as beneficiary of your assets, one potential threat is that, in the event of a divorce, the assets you’ve bequeathed might pass outside the family “line.”
Big, bad #3: influenced and unwise decisions
You’d like to think your beneficiaries will always make responsible money choices, but realize that may not always be the case. A grandchild may someday fall under the influence of someone who steers them in the wrong direction….
An important aspect of the estate planning process, therefore, involves considering just these sorts of “worst-case scenarios”. At Geyer Law,we design and establish trust arrangements to avoid these concerns and ensure the intentions of our clients are carried out.
Trusts: separating legal and. beneficial ownership
Leaving assets outright to beneficiaries opens the door for them to become prey for creditors, predators, and divorcing spouses, one California estate planning colleague explains. What a trust does is protect your assets and keep them in the family.
Afraid of the “big, bad 3? You should be. That’s why, at Geyer Law, we begin by carefully evaluating your unique situation, discussing your beneficiaries and your goals in leaving them assets, then developing a customized plan to protect both the assets and your beneficiaries’’ well-being.
– by Ronnie of the Rebecca W. Geyer blog team