The most common way to pass assets on to beneficiaries is by using an estate plan. If you write a will, you can select certain beneficiaries who should receive financial assets, tangible assets, real estate, family heirlooms and much more. You can also set up a trust that will hold assets for a beneficiary, often with a specific goal in mind – such as preserving access to government benefits or paying for future educational costs.
But one important thing to remember is that there are certain types of accounts that have their own beneficiary designations. If these are in conflict with the estate plan, the designation will likely take precedence. This can sometimes lead to disputes or situations where your estate may not actually be divided as you intended.
2 common examples
Two examples of these types of accounts are payable-on-death accounts, also known as Totten trusts, and life insurance policies. Both ask you to name a beneficiary. With a POD account, the beneficiary becomes the account holder. With a life insurance policy, the beneficiary receives the payout.
One of the most common issues is when someone writes an estate plan that provides different instructions. If a life insurance policy says that only one beneficiary should receive the payout, but your will says it should be divided between two beneficiaries, only the person named on the policy will actually receive the funds.
Setting up your estate plan
It is important to consider how different estate planning documents can work together and when conflicts could arise. Be sure you know exactly what legal steps to take to set up a plan that works for your family.