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Beneficiary designations and estate planning in Connecticut

On Behalf of | Aug 26, 2022 | Estate Planning |

Deciding who would inherit your assets in Connecticut is an integral part of estate planning. This decision is often made easier by creating a will, but many people don’t realize that there are several other ways to designate beneficiaries, including retirement accounts, investment accounts, trusts and life insurance policies. While working on these documents, it’s crucial to avoid mistakes that would make things difficult for your loved ones.

Name your beneficiaries

Naming beneficiaries supersedes anything written in a will because assets on those accounts are passed on through a contract, not probate. This means your loved ones won’t have to wait for the judge to determine how your assets should be distributed. On top of that, your financial company may have its own set of rules regarding where your assets will go after you pass, which may not be what you envisioned for yourself or your family.

Keep your beneficiary designations updated and have contingencies

It’s crucial to review your beneficiary designations regularly and update them as needed, especially after major life events like marriage, divorce, the birth of a child or the death of a spouse. Also, naming contingent beneficiaries in case your primary beneficiary dies before you do may be a good idea.

Naming a trust as a beneficiary for your retirement accounts

While naming a trust as a beneficiary for a retirement account may seem like a good estate planning idea, it could turn out to be an expensive mistake. This is because it’s better to distribute proceeds from accounts like IRA and 401(k) to a person rather than an entity to maintain their tax advantage status. However, if you can ensure that your trust meets the standard pass-through treatment, then this may be a good option. And, if you have minor children, you can name a conservator or guardian to manage the proceeds in the retirement accounts for them until they reach the age of 18.

Making sure your assets are distributed how you want after you die is an integral part of estate planning. By understanding how beneficiary designations work and taking some time to review your choices, you can ensure that your loved ones are taken care of according to your wishes.