Sitting down to write your last will and testament is a complicated and emotionally involved process. What do you do with the property, wealth, and assets you have spent a lifetime building? Who do you leave them to and what does this process look like? Perhaps you wish to set up a trust or an estate, but that brings you back around to the same question. Who should you entrust with your legacy? In short, who should be your beneficiary?
Related Blog: The Difference Between Wills and Trusts
What is a Beneficiary?
What or who is a beneficiary? In the simplest legal terms, a beneficiary is a person, or persons, who inherit or receive your assets from you.
There are several options for appointing a beneficiary to different legal options.
Wills—A last will and testament is a legal document that sets out who will inherit your money and assets upon your death. A beneficiary of a will is the person named in the will who will inherit.
Trusts—Trusts are a fiduciary relationship where you as the trustor gives a second party (the trustee) the right to hold property, assets, or money, for the benefit of a third party known as the beneficiaries.
Estates—Your estate is the sum total of all the assets at your disposal including wealth, investments, land, and assets. Estate planning is the process of deciding how your estate will be divided and distributed for inheritance.
Why Do I Need One?
There are many reasons for you to name your beneficiary now and handle all paperwork while you are still alive and in good health.
If you do not specify a beneficiary, either a friend or family member or perhaps a charity you value the work of, your executors will have no choice but to follow the law when distributing your estate and this may cut out people you wish to protect.
Another reason is that you can avoid infighting amongst your family and friends after your death by clearly spelling out your wishes while you are still alive and keeping them updated as times change. People handle grief in many ways and there is nothing more painful than a family tearing themselves apart over the assets of a loved one due to their misplaced grief.
Whom Should I Pick as My Beneficiary?
For many people, their wills will name both a primary as well as secondary and tertiary beneficiaries. But how do you choose who you will name?
Many married couples will most likely name their spouse as their primary beneficiary with adult children, other relatives, friends, and church or charitable organizations taking up the secondary and tertiary positions.
Whoever you decide upon, it is important to remember a few things:
- Keep Your Paperwork Up-to-Date—Life events such as divorce or death can change who you wish to name in your will as your beneficiary. If you do not update the paperwork as life changes, your requests will not be known or taken into consideration with executing your estate.
- Avoid Naming Minor Children as Primary Beneficiaries of Wills—Instead, leave them a trust with a trustee in charge of protecting it until they reach a certain age.
- Make Sure You Include Secondary and Tertiary Beneficiaries—If something were to happen to both yourself and your primary beneficiary, there would be no one left named in your will to inherit and your problems revert to square one. Always make sure you have considered all possible options and events.
What Happens If I Do Not Name One?
In the event you do not name a beneficiary, when your estate goes to probate, the executor will default to the law and distribute your estate in accordance with State law.
Thinking about your own death is difficult. What will happen to your loved ones and who will take care of them after you are gone. If you have any questions about setting up a trust or estate plan, contact us today.