What to know about beneficiary designations

It isn’t uncommon for Pennsylvania residents to overlook beneficiary designations when they are making an estate plan. This may be because they are but one of numerous decisions that a person must make when setting up a retirement or brokerage account. In some cases, many years may go by before such a designation is reviewed. In that time period, it is possible that a person’s needs have changed significantly.

When making a beneficiary designation, it may be best to think for an individual to think about the people who he or she is closest to. However, it may not be the best idea to name a minor or someone with special needs as a beneficiary as that person may not be able to receive or use the funds properly. In many cases, leaving assets to a spouse results in better tax treatment.

If a person is named a beneficiary by mistake, it is important to remedy that problem as soon as possible. For instance, an adult child may be named the joint owner of a bank account to help a parent manage his or her finances. However, the child may choose to use that money for his or her own purposes. Furthermore, the child would own that account when the parent passes on even if that was not the intended outcome.

It may be worthwhile to talk to an attorney prior to naming someone a beneficiary to an asset. It may also be a good idea to talk with an attorney about changing a beneficiary designation. Doing so may allow an individual to have confidence that this change will be made in accordance with that person’s wishes and in accordance with the law. When done correctly, assets with beneficiary designations may not be subject to the often lengthy probate process.