John Bullis: Beneficiary designation takes precedence over will, trust
The named beneficiaries of IRAs, life insurance, annuities and retirement plans should be verified at least every two years.
The beneficiaries will receive the item (or the proceeds from it) directly, whether or not there is a trust or a will. The beneficiary designation takes precedence.
As you know, a lot can happen in two years. There can be all kinds of “life events” such as marriage, divorce, births, deaths, disagreements and just a change to be done.
The goal is to be sure you have a copy of all your beneficiary designations that should be kept with your will and/or trust documents. If you can’t find the beneficiary designations you can contact the custodian (IRA custodian is usually the stock broker) or the life insurance company, etc.
The custodian will be glad to send you a form to use. They can also send you a copy of the beneficiary designations they have on file. You can change the beneficiaries (if that is your desire) and send the form back to the custodian, keeping a copy for your files.
It’s good to name not only a primary beneficiary but also some contingent beneficiaries. For example, your spouse might be the primary beneficiary, but your sisters, brothers, children, grandchildren or friends could be contingent beneficiaries.
If the primary beneficiary is not alive, then the contingent beneficiaries will inherit. If the primary beneficiary is alive and does not want to inherit the item (or doesn’t want all of it), a disclaimer statement can be done.
To disclaim or decline an inheritance, the form must be signed within nine months of death and before receiving any part of the inherited item. That could be a benefit, especially if the primary beneficiary does not need or want all or part of the item (IRA, life insurance, annuity, etc.). Disclaiming does not usually result in having it counted as a gift for gift tax purposes.
Why not check all of your beneficiary designations now? You can make any changes you desire, but only if you file the corrected designations with the custodian.
Did you hear “Save the whales. Collect the whole set”?
• John Bullis is a certified public accountant, personal financial specialist and certified senior advisor serving Carson City for 45 years. He is founder emeritus of Bullis and Company CPAs, LLC.