Probate, Estate Planning, and Litigation

Update Your Beneficiary Designations or Your Estate Plan May Fail

Now that the summer heatwave is upon us, take an hour during the hottest part of the day and verify that your beneficiary designations for your financial, investment, retirement, life insurance, and similar accounts are properly designated.

What does “properly designated” mean in this context? The answer depends on your estate plan, including your Will and any trust(s) you might have.

If you already have an estate plan, your attorney should have discussed your beneficiary designations with you. However, you should review your designations if you have not done so in several years or you have had any new births, deaths, or marriages in your family. You should review your estate plan annually. 

As an easy reminder, we suggest reviewing your estate plan when you file your taxes. It should take you less than an hour to do this review. If it takes you more time than this, you should consider consulting with an attorney to review your documents and your goals. He or she should be able to inform you whether your estate plan meets your goals or if changes are necessary.

The key point to remember with beneficiary designations is this: the listed beneficiary or beneficiaries, if any, will receive the asset. When there is a designated beneficiary or an account is payable on death to one or more persons, the account is NOT part of your estate. This means the account will not be distributed by your Will or your trust (unless your estate or your trust is listed as the beneficiary).

Less than one-half of the people who consult with us for estate planning actually need a trust. Most young people and couples do not need a trust. Several key reasons to consider a trust are: you own property in another state, you have young children or other young people (usually minors) you wish to leave part of your estate to; you are leaving part of your estate to someone with special needs or someone who is receiving public benefits; you are leaving part of your estate to someone who has poor judgment and financial management skills; or you are fortunate enough to have a high net worth.

For most young people and young couples, an estate plan that includes provisions in their Will for the creation of a trust if a minor is to receive property is sufficient until they have accumulated more wealth. Often times the cost of creating a trust is better spent providing for their needs while they are establishing themselves at work, starting a family, or are trying to accumulate savings for a “rainy day” fund. Until you have one of the reasons noted above to establish a trust, the cost of creating a trust is, generally speaking, not justifiable.

On a side note, if you own any real property (land and/or buildings), you should also check title to the property (the tax assessors office is NOT representative of legal ownership). Certain types of title keep real property from being part of an estate. Two examples, without going into details, are: holding title as joint owners with right of survivorship (the ownership of the joint owner who dies simply ceases to exist) and beneficiary deeds. You can read about beneficiary deeds on a previous post by clicking here.

If you have any questions about the relationship between your estate and your beneficiary designations and/or the joint ownership of bank accounts, you should consult with an attorney.

This posting is for the purpose of general information only. It addresses the general application of Colorado probate law and is not legal advice. Each individual situation requires a careful review of the facts in order to properly apply the law to the facts. 

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