Beneficiary designations and estate planning

Ohio residents who are planning on how their property will be distributed when they die may want to step back and review the existing beneficiary designations on assets like retirement plans, life insurance policies and annuities. These designations take precedence over contrary provisions in a will, and they could potentially conflict with the goals of an estate plan.

For example, an estate plan structured to limit an heir’s exposure to taxes or creditors might be hindered if, for example, an IRA’s funds go directly to the named beneficiary outside the protection of a trust. Financial planners recommend that beneficiary designations be integrated into a person’s estate planning strategies. Beneficiaries are often determined in haste while setting up something like an employer-sponsored retirement plan.

Conflicts with the intentions of an estate plan could be avoided when beneficiary designations are thoughtfully considered within the design of wills and trusts. In some situations, a third party should be the trustee of a trust, especially if the beneficiary is not to be informed about the assets. This might be appropriate when the beneficiary is a minor, disabled or at risk of debt collection. When it is appropriate to inform a person about being a beneficiary, supplying account information would make the process easier and could allow the beneficiary to plan for the receipt of the funds.

A regular review with the assistance of an estate planning attorney should be made of the beneficiary designations, and circumstances such as a divorce or the birth of a new child may often dictate that a change be made. Many of these types of assets pass outside of the probate process, thereby avoiding the delays and costs that would often accompany distributions made pursuant to a will.