Deciding: who should be my beneficiary may be a no-brainer for some people. But for others, it might be a bit more difficult. Do you leave the assets in your estate solely to your spouse? To your children? To a charity? To multiple family members or friends? More importantly, which assets even need beneficiaries?
You’ll designate beneficiaries for several types of assets - from your Will to your Life Insurance policies - and while there is no hard or fast rule about who to choose, there are some things you should be familiar with so you can make the best, most informed decisions possible.
To fully understand how the idea of a beneficiary fits into your overall Estate Plan, read on.
Who Should I Give my Assets to When I Die?
Before you even start your Estate Plan (or if you’re just thinking of updating an old, outdated plan), you should know that your decisions will depend on many things. And while a big part stems from your circumstances - keep in mind that regardless of what your situation is, technically you can choose virtually anybody you want to be a beneficiary to your estate. It’s true, most people choose their spouse or children, but remember, that’s not necessarily your only option.
Who Should be my Primary Beneficiary - Spouse vs Child
More often than not, people select their spouse as their primary beneficiary, and then name their children as contingent, or secondary, beneficiaries. However, the age of your children will likely come into play here.
Especially if you have young children, you want to be prepared if your spouse either predeceases you or is unable to accept and manage the assets in the estate for any reason. In order to fully protect your children, you need to do more than just set up primary and contingent beneficiaries.
If at any time your minor children end up being primary beneficiaries (whether you’ve initially set up your Estate Planning this way, or if you named them contingent and your primary beneficiary cannot inherit assets), you’ll want to have set up a safeguard to protect them.
Should I Leave my Assets to my Children or Their Appointed Guardian?
Establishing guardianship for your minor children is the best protection you can provide for them. If you’re ever unable to care for them yourself, a guardian would have authority to make medical, education and housing decisions on your behalf.
Trust & Will makes the process of appointing guardianship simple, affordable, effective and best of all, fast. In fact, it takes only a few minutes to name a guardian for your children. We have everything you need to create an Estate Plan that protects your loved ones.
Once you have guardianship set up properly, you should then focus on how to ensure your children will best be cared for.
Note that if you leave assets directly to the guardian you appoint, he or she will essentially own them. Of course we would like to be confident that anyone we name guardian will take care of our children just like we would. But the reality is, if that’s the route you go, you have little control over what happens in the future.
In order to best protect your children, you may want to either:
-Leave assets directly to them (by naming them beneficiary)
-Consider setting up a Trust that’ll guarantee they’ll benefit from your estate
If your children are minors and you decide to make them beneficiaries, they would own the assets. The guardian you appoint would merely be responsible for managing those assets for them. He or she could use assets from the estate to cover many of your children’s expenses, but they would not have free will to spend on anything that would be a personal benefit not related to the children.
Of course another option would be to create a Trust. Trusts can hold assets that would ultimately benefit your children, but they’d be managed by a Trustee (who may or may not be the same person as the guardian you name). He or she would handle the Trust until the children become of age or reach whatever stipulation you put on them receiving funds from the estate.
Setting up a Trust for Your Minor Children
Many people think that Trusts are only for the very wealthy, or for those with complicated estates. But in truth, Trusts have many benefits, including incredible protection.
For one thing, Trusts avoid probate, which is often a lengthy, stressful, expensive process that can drag out and prevent assets from being distributed in a timely manner. Another benefit to Trusts is they allow you to have more control over what you want to have happen to your estate. This can help put your mind at ease, particularly when you’ve got minors you’re worried about.
Naming Your Child as Beneficiary - Other Factors to Consider
While it is most common for a spouse to be named as a primary beneficiary, as we’ve already discussed, you can of course name a child to be first in line to receive assets from your estate. If you’re considering this, there are a few things you should keep in mind. For example:
-If you were to pass away today, would your child/children be a minor or over the legal age of 18?If a minor, you should definitely think about setting up a Trust to hold the assets for you.
-Are you confident your child/children would be able to handle a large sum of money? If you’re concerned about a child’s financial responsibility (or lack thereof), you can establish provisions in the Trust that will help prevent them from squandering an inheritance.
-Are you willing to consider creating separate Trust shares for your adult child/children? Separate shares mean siblings could each have their own stake of the assets. This allows each child to benefit from his or her own portion of the Trust without having to come to an agreement about how money is spent.
-Do you have a contingent beneficiary in mind if you decide to name your child/children as your primary beneficiaries? Remember that you always want to name contingent beneficiaries so your estate isn’t tied up in probate if your primary beneficiary isn’t able to receive assets for any reason.
-Don’t be afraid to ask for help – Trust & Will is here for you, every step of the way.
We get it...Estate Planning can be an uncomfortable process. None of us wants to think about not being there for our children, but being prepared is one of the best ways we can protect them. Don’t get caught up wondering who should be my beneficiary - instead, remember that establishing your beneficiaries, whether it’s your spouse, your children or even a charity, is one way you can control what happens when that day comes you’re no longer able to make decisions. And that, in and of itself, can be the best gift you give to your family and loved ones.
This article was originally published by Trust & Will. Follow this link the learn more about Trust & Will and start your estate plan.