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Horizon Elder Law & Estate Planning Blog

Tuesday, July 26, 2016

Are You Leaving an Inheritance to a Beneficiary?

In estate planning, even something as simple as naming a beneficiary involves some legal knowledge.  Check out the following facts:

  1. A beneficiary of a will doesn’t receive the inheritance immediately.  He must wait a minimum of forty days to claim under a will, and much longer if a probate is necessary.
  2. A beneficiary of insurance or annuity proceeds receives the money directly based on the beneficiary designation with the insurance company, regardless of what the deceased person’s will says.
  3. Naming beneficiaries on retirement accounts are tricky.  Inherited funds can be stretched out over a beneficiary’s lifetime, growing tax deferred. Never name your estate as a beneficiary, which subjects it to probate and increased taxes.  Generally, don’t name a trust as beneficiary. Naming individuals is usually a better option. The tax rules on these accounts are complicated, so it is wise to obtain counsel prior to naming beneficiaries.
  4. Do not name a disabled person to receive anything directly as a beneficiary. This may cause a loss of much needed government assistance for care needs.  Look into naming a special needs trust for the beneficiary to protect government benefits and maximize what they receive.
  5. Do not name a child outright as a beneficiary.  Naming a trust for the child, or a custodian account for the benefit of the child under the California Uniform Gifts to Minors Act will protect the inheritance.

It is wise to seek counsel from an experienced estate attorney prior to completing any beneficiary designation form.


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