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Beneficiary Designations and Other Non-Probate Property Transfers

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One of the most overlooked aspects of estate planning is beneficiary designations and non-probate transfers. However, it is worth the effort to designate a beneficiary because it will avoid the complexities of probate along with its hassles and expenses.

A non-probate transfer is the simplest method to avoid the probate process. These transfers automatically take place upon the passing away of a person. Probate doesn’t affect certain insurance policies, bank accounts, and financial accounts if set up properly.

Common Non-probate Assets

There are certain assets that don’t need to go through the probate process. They can be passed to your friends, family, or a favorite charity among other organizations as non-probate assets. Common examples of such assets include:

  • Life insurance and policy payouts
  • IRA and 401(k) accounts
  • Certain brokerage and bank accounts

You need to choose a beneficiary for each asset using the beneficiary designation form to prevent non-probate assets from entering the probate process. Transfer of the ownership of these assets can occur smoothly once you die. Your beneficiaries can avoid the probate process.

Importance of Designating Beneficiaries for Non-probate Assets in Kentucky

Without naming beneficiaries on your non-probate assets, you will not be able to control their transfer. Most institutions transfer the assets to a default beneficiary, such as the estate or children. However, this process takes time, and your loved ones won’t have access to the assets for a while.

The responsibility of claiming ownership over a non-probate asset is of the beneficiary. It is easy for non-probate assets to get caught in the probate process if no one knows that they exist or who should inherit them. The assets may become inaccessible to your loved ones at a time when they need them the most. You can prevent this confusing situation by assigning beneficiaries and keeping a record of them.

Who Can Be Designated a Beneficiary?

It is up to an individual in most cases. However, for married people, their spouse may have a right to a portion of the assets even if the asset owner names another individual as the beneficiary. These are a few popular choices for beneficiaries:

  • Family members including domestic partner, spouse, parents, children, and grandchildren
  • Non-relatives, such as friends or romantic partners
  • Charities and non-profits

You should note that minors are usually not allowed to receive property until they become adults. You may need to name the child’s legal guardian or custodian as the beneficiary. You can also establish a trust for your child and appoint a trustee to manage all the funds.

Setting Up a Beneficiary for Non-probate Assets

Designating beneficiaries for life insurance policies, bank accounts, and 401(k) accounts is a three-step process:

1. Create a list

The first step is to list all your non-probate assets. You can create an excel sheet or make a list of them (the old-fashioned way.) For instance, if you have a life insurance policy with Nationwide and a Roth IRA account with Fidelity, you may want to consider listing the information and keeping it next to your other estate planning documents.

Don’t forget to include other important information, like policy and account number. You can make it easier for your loved ones to track down information once you are not around.

2. Set up beneficiaries

The next step is to get in touch with all your account-holding institutions for setting up beneficiaries. Most institutions prompt their clients from time to time to set up or revise existing beneficiaries.

Depending on the institution, you may be able to set up a beneficiary in the following manner:

  • You may want to call their customer service line and ask them for information regarding designating or updating a beneficiary
  • There may be a dedicated beneficiary designation form available on their website which can be printed, filled out, and mailed back
  • Several institutions have an online account portal to allow their clients to set up beneficiaries on their account

3. Update your tracking document

Whether you track the existing list of beneficiaries electronically or on paper, it is recommended that you keep the list updated at all times. This will make it easier for your loved ones to know where to look and what to do when you pass away.

You Still Need a Will

It is always a good idea to have a last will and testament, even if you have designated beneficiaries on all your non-probate assets. You would still need to make plans for probate assets, such as real estate and vehicles – Kentucky does not allow transfer-on-death designations for these assets. A will is a powerful legal document that protects the important things that matter. You can save time, stress, and money for your loved ones by creating one.

Speak to an Estate Planning Attorney Today in Kentucky

The dedicated attorneys at John H. Ruby & Associates are here to help you with all matters pertaining to estate planning. Speak to us at 502-895-2626 or contact us online to schedule your appointment with us.