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How Beneficiary Designations Impact Your Florida Estate Plan


There are many aspects of Florida estate planning that go beyond making a will. In fact, you may not realize it but there are some assets that do not pass under your will at all–even if you do not have a separate trust. If you have a retirement account or life insurance policy, for example, you will be asked to sign a form naming a beneficiary to inherit that asset upon your death. These beneficiary designations override any contrary instructions that may exist in your will or trust.

Considering the Need for Future Changes

Beneficiary designations are therefore a useful tool in minimizing the need for formal probate of your estate. But it is still important to have an overall estate plan that takes into account any beneficiary designations you make (or later change). After all, if your goal is to ensure a particular distribution of your property, it will be necessary to consider potential fluctuations in the value of your assets.

For instance, say you have two children, and you want to leave half of your estate to each. Your main assets consist of your home and a retirement account. At the time you make your estate plan, these assets are roughly the same in value. So you make a will leaving the house to one child, while signing a beneficiary designation leaving the brokerage account to the other child.

But what happens if 5 or 10 years down the line, your brokerage account is now worth substantially more than your house? Or what if you sell the house and move into a smaller one? You might need to revise your estate plan if you still want to ensure each child gets approximately half your estate.

Also consider there may be scenarios where you mistakenly assume a beneficiary designation is no longer valid. This commonly happens in divorce cases. You named your spouse as the beneficiary of your IRA. You subsequently divorced, and the divorce settlement clearly states the spouse disclaims any interest in the IRA. But you never change the actual beneficiary designation.

In many situations of this kind, the IRA plan administrator is still obligated to follow the original beneficiary designation. That means your ex-spouse is now the rightful owner of your retirement account. Again, beneficiary designations are governed by federal law, which does not automatically account for divorce settlements reached under state law.

Could a Trust Be Your Best Estate Planning Option?

One alternative to using beneficiary designations is to place all of your assets into a trust. Then a single trustee can distribute your property as you direct, without regard to the distinctions between state probate law and federal pension rules. Of course, trusts carry their own degree of legal complexity and risks, so you should always consult with a qualified Fort Myers estate planning attorney before committing yourself to any such arrangement. Contact the Kuhn Law Firm, P.A., at 239-333-4529 to schedule a free consultation with a member of our estate planning team today.

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