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Designating estate beneficiaries in California

Anyone holding a policy with a payout upon the death of the policy holder must designate beneficiaries to inherit the funds. In addition to naming beneficiaries for life insurance policies, retirement plans, annuities and IRAs, California residents should carefully consider how they select their heirs. To preserve a legacy, careful estate planning is essential.

An annual review of beneficiaries helps to ensure that documentation is up-to-date. The recent loss of a loved one may necessitate changing the heirs in a life insurance policy or another asset. Other major events, such as the birth of a child or grandchild, buying or selling of a home, divorce or marriage, should spark a review of beneficiaries. If any of the heirs have special health care needs, the estate holder may wish to create a special needs trust that will be managed by a trustee appointed by the creator of the trust.

Many individuals do not realize the impact of the administrative tax on an estate. To preserve assets, estate planning must consider the finances of the deceased as well as those of the heirs. Estate taxes do not apply to spouses, but they may apply to others. A person does not need to leave a large estate in order for the distribution of assets to become complex if there is no will or specific beneficiary.

Leaving substantial assets to certain beneficiaries may have considerable and unexpected financial consequences that may be avoided with attentive planning. Consulting with an estate-planning attorney may help with complex situations, such as special needs trusts and contingent beneficiaries. Attorneys might also be able to draft the documentation necessary to form other estate planning devices.

Source: Morning Star, "How to Handle Beneficiary Designations", Christine Benz , October 10, 2014

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