As you plan your estate, choosing a beneficiary is one of the most significant decisions you’ll need to make. This decision is crucial in ensuring that your loved ones are cared for and that your legacy is preserved long after you’re gone. To make this decision easier, it’s essential to approach the process with careful thought and consideration. In this article, we’ll cover everything you need to know about beneficiaries, including what they are, how to choose them, and other factors to consider when making this critical decision.
A beneficiary is a person or entity you choose to receive the death benefit from your life insurance policy. For example, you can name one or more individuals, a trustee of a trust you have set up, a charity, or even your estate. If you do not name a beneficiary, the death benefit will be paid to your estate.
There are two levels of beneficiaries: primary and contingent. The primary beneficiary receives the death benefit if they are found after your death. The contingent beneficiary receives the benefit if the primary beneficiary cannot be found. If neither can be found, the death benefit will be paid to your estate.
You should clearly identify your beneficiaries and provide their social security numbers to avoid disputes. For example, an ex-spouse could claim the benefit if you only list a relationship, such as “wife” or “husband,” without a specific name. If you name specific children, any later-born or adopted children will not receive the benefit unless you change the beneficiary designation to include them.
Beneficiaries play a minimal role during estate administration, but they can take legal action if the executor fails to administer the estate or not meeting their duties. In addition, when the executor unreasonably delays the administration, beneficiaries can take action to speed up the process.
However, most motions a beneficiary starts during the executor’s year will not be heard by the courts. Beneficiaries can also take legal action if they notice discrepancies or errors in the executor’s account or if estate assets are missing. In more extreme cases, beneficiaries can sue the executor on behalf of the estate or file for the courts to order the executor to pay debts belonging to the estate. Beneficiaries are not liable for unpaid debts by the executor if they receive their share of the estate.
If you fail to keep your beneficiary up-to-date or neglect to name one, the remaining benefits will be paid to the last beneficiary on file, or the plan document’s terms will set the precedence. Typically, the general order of default beneficiaries is your spouse, your children, and then your estate. However, this may result in your family members having to go through probate court and deal with legal ramifications and administrative headaches. The probate process can freeze most of your assets until a will is located and validated in court, debts are paid, and assets are released.
If you have a living beneficiary listed on your retirement plan, the assets in those accounts will not be subject to probate. However, it is a misconception that not naming a beneficiary on your retirement plan will default to who is listed in your will. Instead, the determination will be left up to the plan document or default terms of the account.
Ohio intestate laws determine how assets are distributed when someone dies without a will. If the deceased had a spouse, the entire estate goes to the surviving spouse unless there are children who are not the surviving spouse’s natural children, in which case the distribution is different. If there are children but no spouse, the estate is divided equally among them. Suppose there is no spouse or children; the deceased’s parents inherit, followed by more distant relatives. If no living relatives are found, the state of Ohio inherits the estate.
While these laws may reflect your desired distribution, having a will ensures that your assets are distributed according to your wishes. For example, you may want a life partner or close friend to inherit instead of a family member. Without a will, the court would not know or honor these wishes. Working with a lawyer to draft a will allows you to choose exactly who inherits your assets, whether it’s a charitable organization or a distant relative. Don’t wait to draft a will – do it today!
Choosing a beneficiary is a crucial part of estate planning that ensures your loved ones are cared for, and your legacy is preserved. Beneficiaries play a minimal role during estate administration, but they have legal options available if the executor fails to administer the estate or does not meet their duties. Failing to name a beneficiary or keep them up-to-date can result in your family members going through probate court, leading to legal ramifications and administrative headaches. Ohio intestate laws determine how assets are distributed when someone dies without a will, but having a will ensures that your assets are distributed according to your wishes. Therefore, working with a probate law firm is crucial to draft a will that accurately reflects your desires and ensures your assets are distributed as you wish.
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