How do beneficiaries factor into estate planning?

On Behalf of | Aug 11, 2021 | Estate Planning

Estate planning often involves deciding “who gets what.” That is, when writing a will, the testator decides what beneficiaries receive specific assets and property. In the absence of a valid will, a Colorado probate court follows intestate law when making distributions. Carefully choosing the beneficiaries, both in the will and on various financial accounts, could increase the chances the planner’s wishes are followed.

Selecting beneficiaries during estate planning

Probate is not always necessary, and estate planning decisions could involve naming beneficiaries to particular accounts. Financial and brokerage accounts allow someone to choose one or more beneficiaries. When the primary account holder passes away, the presentation of a death certificate may support the ownership transfer.

When probating a will, the process of transferring assets may take longer. Also, a disgruntled heir might contest the will, causing even greater delays. That said, successfully contesting a will requires overcoming high legal thresholds.

Carefully selecting one’s beneficiaries and awarding them with equitable distributions could make probate less acrimonious. And then, there are other things to think about when naming beneficiaries.

Thinking carefully about beneficiaries and estate planning

Thoroughness means a great deal when taking part in estate planning. Leaving an account “orphaned” might cause problems. Such an account would be one without a TOD beneficiary designation and also not mentioned in a will. Careful estate planning could prevent such oversights.

Other considerations may come into play when choosing a beneficiary. Is the person responsible enough to handle a significant financial windfall? If not, it may be better to set up a trust rather than leave assets through a will. Sometimes, careful planning involves thinking about the impact of leaving a beneficiary’s assets.