Probate can take a lot of time and cost your estate a great deal of money after you die. For this reason, many California estate planners seek to prevent some of their assets from going through probate before distribution to heirs.
One common way to bypass probate involves the creative use of death beneficiaries. Death beneficiaries allow the transfer of wealth from one person to another without the complexities of probate.
What are death beneficiaries?
Many financial accounts and insurance policies include death beneficiary designations. Estate planners must fill out these death beneficiary designations appropriately or the intended heir might not receive the funds contained in the accounts. Death beneficiaries allow heirs to receive certain assets directly without probate.
Here are several types of financial accounts that use death beneficiaries:
Payable on death accounts: These are bank accounts or other financial accounts that include special “payable on death” instructions. Most banks allow you to complete a form that names the beneficiary who can receive the assets in the account at the time of death. When this beneficiary presents the death certificate and appropriate identification, the bank will immediately transfer ownership of the funds to this person.
IRA and 401(k) accounts: IRA and 401(k) accounts will have death beneficiary designations. These designations could trump anything referenced in a will, so it’s vital that they are up to date and accurate at all times.
Transfer on death registrations: Sometimes it’s possible to transfer specific brokerage accounts, bonds and stocks to someone else upon death. Similar to payable on death accounts, by signing a registration statement, estate planners can declare who shall receive a specific security after they die.
Are your death beneficiaries up to date?
It’s important to understand how California estate planning laws apply to the death beneficiaries on your accounts. For example, do you need to mention specific investment accounts in your will, or do your death beneficiary designations cover the assets in those accounts sufficiently? By understanding the law and reviewing death beneficiary designations regularly, estate planners can ensure they are set up in a way that reflects your intentions.