Healy & McCann, PC

Incorporating beneficiary designations into an estate plan

Oregon residents and others who use beneficiary designations should take steps to ensure that they don't derail other parts of an estate plan. While taking assets out of an estate might avoid the need to go through probate, it may also leave insufficient funds to pay taxes or make gifts. If a trust is being used to save money on taxes, it is important for the trust to be named the beneficiary of an asset as opposed to an individual.

It is also generally better to name a trust as a primary beneficiary as opposed to a spouse. This is because the trust may already have a provision that provides resources for that spouse. If an asset goes directly to that person, he or she may exert more control over it than an individual envisioned. It is even more important that any change to a beneficiary designation not be made at the last minute.

Depending on who the new beneficiary is, it could result in a higher estate tax bill. Furthermore, it could result in a lawsuit from other beneficiaries who may no longer be entitled to a cash payout. Those who are going to leave funds from an IRA or 401(k) to a trust will need to include specialized language to ensure that the designation is made correctly.

As estate planning can be a relatively complex process, it may be best to go through the process with the help of an attorney. It may be possible for an attorney to talk more about the benefits of trusts, beneficiary designations and other planning tools. Legal counsel may help to create or review an estate plan on a person's behalf. This might maximize the chances that an estate plan meets an individual's current and future needs.

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