Building wealth can be an important part of financial planning, since it can help you enjoy life and provide for your family. But as the saying goes, you can’t take money with you when you die. So part of financial planning is thinking about how you might leave an inheritance. Or, to put it in another way, who will be the beneficiary for your various assets.
Since there are a number of ways to leave money to family members, friends, or charities, it probably won’t surprise you that there are just as many types of beneficiaries. We’ll walk through a few of those here, and then spend a minute looking at how a trust can help simplify the process.
Name Beneficiaries Via:
If you have any kind of retirement account, including a 401(k) through work, you were likely asked to name a beneficiary. If you designate a beneficiary — and complete all the associated steps — the assets in your retirement account pass to your beneficiaries, according to IRS rules, upon your death. In other words, the assets in these accounts will bypass probate. However, the way your beneficiaries will be able to access the funds, and the amount of tax they’ll pay, varies significantly depending on a variety of factors.
When you purchase a life insurance policy, you must name a beneficiary to receive the potential payout in case you die. You can name primary and secondary (or contingent) beneficiaries. So, for instance, your primary beneficiary might be your spouse, but if your spouse were to die before you do, the secondary beneficiary would receive the payout when you die. Like retirement accounts, life insurance does not go through probate; this payout goes directly to the named beneficiary without the intervention of a court and separate from your will.
A will is a legal document spelling out your wishes, including the distribution of your assets. When you will your assets to someone, they’re a beneficiary of your will. After you die, the executor of your will contacts the beneficiaries to notify them of their inheritance and handle the logistics.
How a Trust Can Help
A living trust, sometimes called a revocable trust, can help simplify wealth transfer if you want to leave an inheritance. In this scenario, you might transfer all of your assets into your trust, and name the trust as the beneficiary for both your life insurance policy and retirement accounts.
Then, instead of detailing beneficiaries and contingent beneficiaries for every account, policy, and asset, you simply set up a plan for your trust. For instance, you might specify that your trust be divided equally among your kids, and place age restrictions on when they’re able to access the money.
Doing your trust in this way can also make it easier to update your beneficiaries following major life events, like having a child or getting married.
That type of control isn’t generally available when you simply name a beneficiary for other types of accounts. If you have questions about how you might use a trust to help you leave an inheritance to your family, set up an appointment to discuss creating an estate plan.
YOUR GUIDE TO “BENEFICIARIES”
October 28, 2021
Whitaker-Myers Wealth Managers is an SEC-registered investment adviser firm. The information presented is for educational purposes only and intended for a broad audience. The information does not intend to make an offer or solicitation to sell or purchase any specific securities, investments, or investment strategies. Investments involve risk and are not guaranteed. Whitaker-Myers Wealth Managers reasonably believes that this marketing does not include any false or misleading statements or omissions of facts regarding services, investment, or client experience. Whitaker-Myers Wealth Managers has a reasonable belief that the content will not cause an untrue or misleading implication regarding the adviser’s services, investments, or client experiences. Please refer to the firm’s ADV Part 2A for material risks disclosures.
Past performance of specific investment advice should not be relied upon without knowledge of certain circumstances of market events, the nature and timing of the investments, and relevant constraints of the investment. Whitaker-Myers Wealth Managers has presented information in a fair and balanced manner.
Whitaker-Myers Wealth Managers is not giving tax, legal or accounting advice, consult a professional tax or legal representative if needed.
Copyright (c) 2023 Clearnomics, Inc. and Whitaker-Myers Wealth Managers, LTD. All rights reserved. The information contained herein has been obtained from sources believed to be reliable, but is not necessarily complete and its accuracy cannot be guaranteed. No representation or warranty, express or implied, is made as to the fairness, accuracy, completeness, or correctness of the information and opinions contained herein. The views and the other information provided are subject to change without notice. All reports posted on or via www.clearnomics.com or any affiliated websites, applications, or services are issued without regard to the specific investment objectives, financial situation, or particular needs of any specific recipient and are not to be construed as a solicitation or an offer to buy or sell any securities or related financial instruments. Past performance is not necessarily a guide to future results. Company fundamentals and earnings may be mentioned occasionally, but should not be construed as a recommendation to buy, sell, or hold the company's stock. Predictions, forecasts, and estimates for any and all markets should not be construed as recommendations to buy, sell, or hold any security--including mutual funds, futures contracts, and exchange traded funds, or any similar instruments. The text, images, and other materials contained or displayed in this report are proprietary to Clearnomics, Inc. and constitute valuable intellectual property. All unauthorized reproduction or other use of material from Clearnomics, Inc. shall be deemed willful infringement(s) of this copyright and other proprietary and intellectual property rights, including but not limited to, rights of privacy. Clearnomics, Inc. expressly reserves all rights in connection with its intellectual property, including without limitation the right to block the transfer of its products and services and/or to track usage thereof, through electronic tracking technology, and all other lawful means, now known or hereafter devised. Clearnomics, Inc. reserves the right, without further notice, to pursue to the fullest extent allowed by the law any and all criminal and civil remedies for the violation of its rights.