Posts Tagged ‘bank accounts’

Beneficiary Designations Can be Tricky

We often name beneficiaries on different funds including retirement accounts, insurance policies, bank accounts, brokerage accounts. It is very important to properly designate the beneficiaries on these accounts in order to assure they will ultimately go to the intended beneficiaries.

For example, bank accounts with beneficiaries are called Totten Trusts. If the account owner of a Totten Trust dies with two named beneficiaries on the account, one of whom predeceased the account owner, the result is that one half of the account will go to the surviving beneficiary and the other half will fall into the account owner’s estate. If the account had been set up with the beneficiaries names as joint with right of survivorship, then the full account on the account owner’s death would pass to the surviving beneficiary.

Beneficiary designation forms provided by insurance companies and brokerage firms must be read very carefully.  The account owner may inadvertently indicate  beneficiaries in a way that was never intended. These forms may have default provisions which may take over if the account owner did not sufficiently or clearly indicated how the account is to be distributed.

All beneficiary designations should take into consideration the owner’s estate plan to be sure that these designations will not unintentionally supersede plans created in a will or trust.

It is very important to give careful consideration to naming beneficiaries, and when unsure of the proper way to accomplish estate objectives, ask for guidance.