Who Are Your Beneficiaries?

In your living trust and will, it is necessary to name beneficiaries.  Deciding on the beneficiaries can be a difficult matter to decide and many questions will most likely arise.

First, it is possible to leave specific monetary amounts to named beneficiaries.  It is important 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.  The other option is to leave specific percentages to individuals.  If you are 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.  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.

The next question when you are leaving assets to individuals is how the assets will be distributed if that person predeceases you.  There are many options, such as stating that the assets will be distributed to the beneficiaries’ children or redistributed to other named beneficiaries. 

Many individuals name charities as beneficiaries.  One thing you will want to consider 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?  As the charity sees fit means  that it is up to the charity to decide the best use of the funds. 

Next, you will want to consider how you would like the money distributed if the charity is not in existence at the time of your death or the charity does not qualify as a 501(c )(3).  You may want to consider language addressing that issue.  For example, you can state that these assets will be re-distributed to another charity or leave instructions to the trustee to donate these assets to another 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 that there are no confusions regarding your intended charity.  Many charities have similar names and missions, so it is imperative to leave sufficient identifying information.

Finally, you should also review your named primary and contingent beneficiaries on your life insurance, 401(k)’s, IRA’s, and annuities, and ensure that these named beneficiaries represent your intent.  It is important to coordinate the name beneficiaries in your living trust and will with the named beneficiaries on these other types of accounts.

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

Source:  Affinity Trusts. Not affiliated with KeyPoint Credit Union.