The Importance of Beneficiary Designations in Your Washington Estate Planning
Just because you have a will, does not mean your estate plan is complete. The truth is that you probably have several assets that do not pass under the terms of your will. Most of these assets are held by institutions that allow you to designate a beneficiary, who will automatically receive ownership of the asset after you die. When properly executed, these beneficiary designations allow such assets to pass outside of the Washington probate process.
What Assets Are Subject to Beneficiary Designations?
Some of the more common assets that may be passed through a beneficiary designation include:
- Bank Accounts
- Brokerage Accounts
- Health Savings Plans
- Individual Retirement Accounts (IRAs)
- Life Insurance
- Motor Vehicles
- Real Property
It is best to consult with a qualified Spokane estate planning attorney before making or revising any beneficiary designation as there may be additional tax and legal consequences depending on the type of asset involved. For example, in 2019 Congress adopted significant changes to the rules governing beneficiary designations for retirement accounts. So you want to make sure that your beneficiary designation will not impose any unintended consequence or hardship on your beneficiary.
Always Have a Backup
When it comes to choosing a beneficiary, it is best practice to have at least one primary and one contingent beneficiary. A contingent beneficiary is basically your “backup” if the primary beneficiary dies before you. (You can also designate multiple primary beneficiaries in most cases.) Also keep in mind that your beneficiary does not necessarily have to be a person. You can designate a trust or charitable organization. Once again, however, you should consult with an attorney before making such a designation to help protect against adverse tax consequences.
So what happens if your primary beneficiary does not survive you and you have no contingent beneficiary? In most cases, the asset will simply pass to your probate estate. This largely defeats the purpose of having a beneficiary designation in the first place. For similar reasons, it is generally not recommended to designate your own estate as the beneficiary.
What If Your Beneficiary Designation Conflicts With Your Will?
Consider a scenario where you recently remarried and signed a new will leaving everything to your spouse. But you forgot to update the beneficiary designation on your life insurance policy, which names your brother as the primary beneficiary. In the event of your death, that designation would remain intact even though it arguably conflicts with the terms of your will. Essentially, when there is a lawfully executed beneficiary designation, its terms generally override any potentially conflicting provisions in a person’s will. So it is important to review–and if necessary revise–any beneficiary designations you have when making a new estate plan.
Contact Moulton Law Offices Today
Keeping up with your beneficiary designations is just one aspect of preparing an overall Washington estate plan. If you need legal advice or assistance from a qualified Spokane estate planning lawyer, contact Moulton Law Offices, P.S., today to schedule a free consultation. We serve clients throughout the Spokane Valley, Kennewick, and Yakima area.
