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Beneficiary Designations Are Important

As part of your overall estate plan, it is important to evaluate the accounts and assets that will benefit others through beneficiary designations.

Consulting with your financial advisor about the use of such funds can lead to less income taxes being owed by your estate. Even though the majority of estates currently will not have an estate tax liability, most will have to pay income taxes. Many executors are shocked to learn that the top rate of 37% starts at $12,750 of estate income. Minimizing income taxes through better control of the transfer process and its timing is a worthwhile effort.

Retirement fund accounts, including IRAs, life insurance policies, and annuity policies have beneficiaries listed to show who will receive the funds after the owner’s death.

Often the beneficiary will be the person’s estate (as a default), but anyone can be listed, including a favorite nonprofit organization.

To update the beneficiary on such accounts or policies at any time, the company’s change of beneficiary form is all that is needed. Changing the beneficiary does not affect current use of the account or policy.

These accounts and policies can be the way to support your favorite nonprofit organization after you pass away. When a nonprofit is listed as the beneficiary, no income or estate taxes will be owed by the estate, allowing more funds to be available for other uses. That makes using retirement fund accounts the smartest choice for charitable gifts made through your estate.

Having the transfer of these types of assets controlled by the beneficiary form can also lower estate administration costs.

In West Virginia, the executor must charge a lower fee on this type of account if a specific recipient (a person or a nonprofit) is named than on the assets and accounts controlled by the terms of the will.

Also, using the beneficiary form to handle the transfer of those assets generally means they will be transferred more quickly to the recipient because a simpler process is involved.


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