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Understanding Your Heirs and Knowing Your Beneficiaries

by Kevin Sullivan

Estate planning has often had an air of mystery to some people. The terms used and bantered about by lawyers or planning professionals are not words we use in everyday conversations.  Do you have heirs? Answer: No you don’t – it is a trick question. If you are reading this article, it’s presumed you are alive and breathing. So, only individuals who have died have heirs … but only if they don’t have a last will.  Confused? You are not alone.

Heirs are technically those in your family lineage or by marriage who will receive assets from your estate if you don’t have a will.  Dying without a will is called “intestacy” – not a word you often hear, but it is a term you really need to understand to avoid some unintended consequences created when one dies without a will and no specifications are made in writing.  Probate is known as the court supervised process of an Executor retitling assets to your beneficiaries when you do have a valid will. Beneficiaries are those who are named in your will – or have been listed on such common arrangements as your life insurance, company retirement plan, annuities or your IRA.  Such assets as life insurance and retirement accounts list beneficiaries by contract and therefore supersede the directions of your will in nearly all instances. So, what is stated in your last will – providing you have one – does not control who receives funds from life insurance, IRAs, 401ks, annuities, etc.  Inheritance issues for families can be turned upside down if you do not understand the difference between probate assets and non-probate assets.

The concern with some beneficiary arrangements in retirement and life insurance is they are often signed and then forgotten. Why is this a problem? You may have listed your deceased spouse or still specify your ex-spouse even after a divorce. There are many pitfalls that can occur with beneficiary arrangements due to forgotten policies or bank accounts, children or grandchildren born after the initial acquisition, remarriage, death of a child, etc. At Rockbridge, we urge you to review and discuss with us your beneficiary arrangements with accounts we manage as well as those assets outside of our purview. Too many estate plans can be disrupted or legally contested – much of which could have been avoided by an annual review and discussion of your beneficiaries and general intentions. Changes in family circumstances such as death, remarriage, new family members, and divorces should spur a conversation with your investment, insurance and legal advisors to ensure those individuals or charities who you intend to receive bequests from your estate are those who actually benefit.

Nothing can take the place of an expert attorney skilled at drafting proper estate planning documents such as your last will & testament, any relevant trust documents or Health Care Proxy, Living Will/Advance Healthcare Directive or Power of Attorney. If these terms are confusing, as stated earlier, you’re not alone.  If you have a sizeable estate, complex family dynamics, are charitably inclined, have step-children, second marriages, young children who are minors, for example – you owe it to your loved ones to receive professional guidance in such matters. Please feel free to start the conversation with our team.

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