Considerations when selecting beneficiaries.
By Duane J. Silbernagel
(Continued from last week)
As if working your entire career to save for the myriad of personal financial goals wasn’t enough, deciding what happens to those assets when you pass away is equally important. Most have heard stories of an estate transition ‘gone wrong’ where the assets were passed in a less-than-friendly tax manner or to an individual who the money may not have been intended for.
When considering who the beneficiaries of an estate are going to be, some choose the traditional path: spouse, kids, grandkids – lineal descendants. Others, who may not have direct lineal heirs, may consider siblings, parents, or charity.
Up to this point, we’ve covered life insurance and retirement assets. We’re going to explore one final account registration, and how it can be used in estate transitioning.
Non-retirement assets (referred to as ‘non-qualified assets’) are those items that the descendant leaves that are not considered qualified assets – a definition of exclusion. Examples could include bank accounts, material property (jewelry, furnishings, collectibles, etc) and material property (residential property, rental property, vehicles, etc.). Generally these will be considered non-qualified assets.
When dealing with non-retirement accounts, you can establish what’s called a Transfer-on-Death (TOD). Most banks will allow you to do this on your checking or savings accounts. Again, upon your death, the account is transferred to those who you specify. Depending on your state, county and/or local laws you may even be allowed to establish a TOD designation on real estate.
By establishing a TOD on the asset, it will transition ownership. Please take note, while this will (in most cases) bypass probate, this will not bypass estate tax. It will still be assessed with the estate and taxed accordingly, simply the transition of the asset will happen outside of probate.
Beneficiaries should be monitored on a yearly basis as part of your annual review with your financial professional or estate planning attorney.
I’ve watched as the passing of loved can create a huge divide in families. Money and emotions will do that – believe it or not, you’ll never know how your loved ones take your passing. You’re placing a lifetime of savings in the hands of people who are, at that particular moment, emotionally irrational – remember, they’re dealing with your passing. There is no way to know how that pressure is handled, unless you’ve already made the decisions for them – in accordance to what you want.
In the end, the beneficiary elections on the accounts should be established in accordance with you actual final wishes (i.e., the will or trust). If you want each of your four children to inherit 25.0% each, set the beneficiaries up on every account. It is a disservice to elect only one, and justify that by saying “they’ll take care of it.”
If you’d like to find out more about me visit my website: www.duane.wrfa.com
Have an idea for a topic? Email me: DSilbernagel@WRAdvisors.com
This article is meant to be general in nature and should not be construed as investment or financial advice related to your personal situation. Waddell & Reed does not provide legal or tax advice. Please consult with a professional regarding your personal situation.
Duane Silbernagel is a Financial Advisor in Lincoln City, Oregon offering securities through Waddell & Reed, Inc., Member FINRA and SIPC. Insurance products are offered through insurance companies with which Waddell & Reed has sales agreements. He can be reached at (541) 614-1322, via email at DSilbernagel@wradvisors.com.
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