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How to Assure Your Beneficiaries Receive Their Inheritance

Often, people focus on their wills when planning their estate and they often overlook an essential aspect of the process: beneficiary designations. Updating your estate planning documents will help you ensure that your designated beneficiaries will receive the correct assets. More people place their money into accounts like 401(k)s and IRAs which makes it even more important to closely watch your assets.

About sixty percent of assets of american homes that invest a minimum of $1,000 are put into IRAs and 401(k)s. State laws as well as federal legislation affects who receives these assets and matters may get complicated, especially in the case of divorce and remarriage. It is important you consult with an estate planning lawyer to sort out all the details, including designating beneficiaries.

 

Spouses are the Automatic Beneficiaries

Under federal law, if you are married when you die, your spouse automatically receives fifty percent of any accounts you owned regardless of the designated beneficiary. If there is a designated beneficiary, then they and the spouse each receive a 50-50 split. A spouse always receives fifty percent of the assets of a government account unless they complete a Spousal Waiver and another individual, or an establishment like a trust or estate is a designated beneficiary.

A Spousal Waiver is used so a spouse can relinquish their rights to their portion of the account of their deceased spouse. Usually if someone gets a divorce, they change their list of beneficiaries to include only their children, but if they get remarried, fifty percent of retirement assets will be received by the next spouse, even if they are not included as a designated beneficiary.

 

Designation of a Beneficiary Matters Most

If the 401(k) owner is unmarried at time of death, then their assets go directly to the listed beneficiaries, regardless of the will. Other assets will be distributed to the designated beneficiary as well, regardless of other types of agreements.

Imagine: a man’s wife is designated as the beneficiary for his 401(k). Then they divorce and he does not remove her from the list of beneficiaries, but she does complete a Spousal Waiver as part of the divorce. If the man doesn’t adjust his list of beneficiaries and he doesn’t remarry before he dies, then the ex-wife still receives his retirement funds although their agreement of divorce proves she has waived her rights to the retirement funds.

 

Hiring an Estate Planning Attorney

The best way to answer any questions you may have about your beneficiaries and retirement assets is to consult an estate planning lawyer such as the estate planning attorney Scottsdale AZ today. State and federal regulations regarding estate planning can be overwhelming and it is best to hire someone who is knowledgeable about tax code and inheritance.

Thanks to authors at Hildebrand Law for their insight into Estate Planning.

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