How Annuity Beneficiaries Can Be Contested
Annuities offer several advantages, such as tax-deferred growth and death benefits. But they do come with their risks.
Owners should ensure beneficiaries are named in annuity contracts to protect heirs from costly and time-consuming probate proceedings.
Estate Planning Basics
Estate planning involves deciding how to preserve your assets, manage them, and distribute them upon death. Estate planning can help safeguard family wealth, provide for your spouse and children’s ongoing support, fund their education expenses, or leave a charitable bequest.
Estate planning typically entails creating a will, setting up trusts, making charitable donations to reduce estate taxes, naming an executor and beneficiaries, and making funeral arrangements. But you can tailor it as complex or as simplistically as desired.
As part of an estate plan, it’s advisable to create an inventory of your financial records, titles, and policies so your loved ones can locate these at the time of your death.
Maintaining accurate titles and beneficiary designations is also crucial, as incorrect or outdated designations could have serious tax ramifications and affect the distribution of your assets.
Though estate planning may seem complex, its fundamental principles are essential for anyone wanting to ensure their wishes will be honored following death. By carefully considering your estate plan, you can reduce taxes and maximize the assets left behind to your heirs.
Will vs Without a Will
A will differs from an intestate estate in that it directs how assets should be distributed in the event of death, including identifying beneficiaries, outlining what each is entitled to receive, and designating guardianship for minor children.
Clarifying the decedent’s wishes for an intestate estate can be challenging, causing beneficiary disputes. A skilled attorney should help determine the most efficient action and distribute assets accordingly.
Intestacy laws vary by state, but the surviving spouse or registered domestic partner generally receives the largest share of property upon an intestate’s death. More distant relatives typically inherit if no suitable heir is identified or the deceased was never married or had children.
As it’s common for wills to anticipate fewer assets than are present at the death, leading to partial intestacy, it is wise to include a clause with “any remainder to” or “the rest too.” But, again, having an estate planning professional evaluate your situation and ensure the distribution of assets is according to your wishes is imperative.
What is Probate?
Probate is the legal process that oversees the distribution of assets of an estate after someone dies, such as finding assets and paying any outstanding debts before passing them on to its intended heirs or beneficiaries.
Establishing and validating wills and selecting an executor is also part of this process. Again, however, this can be a complicated and time-consuming task usually handled by an attorney.
Some people avoid probate for various reasons, including cost and privacy considerations. Passing your assets onto future generations without going through probate as long as your estate meets specific state requirements is possible.
Assets typically requiring probate include those owned solely by the deceased, such as bank accounts, homes, cars, jewelry, art, cash, and antiques. However, some assets may be exempt from probate proceedings, such as jointly held between multiple owners with designated beneficiaries or life insurance benefits paid directly to a nominated recipient.
Assigning an insurance policy or investment account directly to a beneficiary can ensure the funds will reach them upon your death. Otherwise, assets risk loss or going through probate. If no beneficiary is designated, any funds could go through probate proceedings and become unavailable to loved ones who depend on them.
Executor vs Administrator
Executors are delegated, in your will, to oversee and disperse your estate, such as selling properties, paying taxes, and gathering and distributing assets to their beneficiaries. Executors have various responsibilities for managing this process and being accountable.
An effective executor understands where your assets should go and will disperse funds according to your wishes. In case of your death without leaving a will behind, an administrator is appointed by the court as executor of your estate.
Under such circumstances, your assets must be distributed according to intestate succession laws and among your heirs.
Reducing stress, headache, and expense associated with estate administration is possible when you enlist Keystone’s experienced administrator and executor attorneys as your helpers. They know the legal system inside and out to get things done efficiently and cost-effectively for their clients.
Updating Beneficiaries and Major Life Events
By designating a beneficiary for your annuity or a life insurance policy, you can ensure the proceeds go directly to those you want them to reach without going through probate after your death. In most cases, this would be your spouse or children.
However, some individuals wish to distribute the proceeds of their annuity or life insurance equally among family members – something which can be accomplished by designating one family member as the primary beneficiary and others as contingent beneficiaries.
Many individuals also make charitable organizations the beneficiaries of their annuity gifts, which can raise funds for specific causes or provide much-needed financial support throughout life.
Keep your beneficiary designations up-to-date if you own an annuity, life insurance policy, or another financial product. If your circumstances change and someone different should receive the proceeds, contact your insurance provider or financial professional and adjust them.
Maintaining up-to-date estate plans is vital for future peace of mind. An experienced attorney can assist in crafting a personalized strategy tailored to meet your specific needs and protect your assets.
Undue Influence and Beneficiaries
Undue influence is a common problem when beneficiaries attempt to convince elderly persons to change the provisions in their will or trust. For example, beneficiaries could include family members or relatives such as caretakers.
Various tests can indicate whether someone exerted undue influence over a testator, including their age, physical condition, medical history, or mental state.
These factors alone may not be sufficient to invalidate a will under undue influence, but they can provide substantial evidence. Combined with other facts or circumstances, they often demonstrate how one beneficiary exerted excessive pressure over a testator and that their wishes did not reflect those expressed by a will contestant.
Divorce and Beneficiaries
Divorce can bring many changes into one’s life, including altering retirement assets, bank accounts, life insurance policies, and beneficiary designations. In addition, divorce can be particularly stressful in cases where relationships between former partners remain contentious; you’ll want to avoid handing over financial assets to them accidentally.
The settlement agreement should cover your divorce and beneficiary issues. However, consult an attorney if you wish to alter an existing beneficiary designation early on. As laws vary widely across jurisdictions, you must understand what’s allowed or required under your settlement before deciding who to name as beneficiaries.
Some states do not permit you to alter an annuity beneficiary when it belongs to your former partner or their family, which can prove particularly troublesome when living together before a divorce filing.
Federal and State Laws Regarding Beneficiaries
You have many choices when selecting beneficiaries for an annuity contract; choosing one should depend on your personal goals and financial situation.
Fixed-period annuities, more commonly called period-certain annuities, provide periodic payouts over an agreed-upon amount of time – either monthly, quarterly or annually.
Deferred annuities allow you to build up savings for retirement over time by delaying payment until later. In addition, they will enable you to set aside savings without feeling pressured into buying annuity payments at once.
As another option, consider designating a dependent minor as a beneficiary – such as a child with disabilities or grandchild with illness – however, they won’t be able to access funds until they reach 18 years of age.
Suppose you plan to leave an annuity as a beneficiary after your death. In that case, you must become familiar with federal and state laws regarding its distribution and how beneficiaries will be taxed.
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