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This is a good question. The answer depends on what your are making the beneficiary designation for. That is, an estate, trust, life insurance policy, IRA or retirement account, bank account. Also, what is the total amount of your assets, are you in a community property state? Finally, what do you want to accomplish. Also, estate plans and most policies and accounts allow you to divide between several beneficiaries and name successor beneficiaries, who take the asset if the primary beneficiary fails to survive.
The most basic answer to the question is then beneficiary should be whoever you wish to receive the property when you die. For most married couples with moderate estates, their estate planning documents, life insurance, etc., will name their surviving spouse as the beneficiary. Where the estate is sizable enough sometimes the couple will establish particular gifts for children. Particularly if there are children of a prior marriage or relationship.
For gifts going to minors (under the age of 18), most states have a version of the Unified Transfer to Minors Act. This act (generally) places a minor's property into the hands of a custodian. A court order is required to access (withdraw) the funds in the account. The entire account comes under the minor's control when they reach age 18. (In California, you can delay this to age 21, but you must include the directions in your estate plan.) As an alternative, where the funds are substantial or require significant management, a guardian of the Minor's estate may be required.
The custodian or guardian is normally appointed by the court, but you can specify one in your estate plan.
To avoid a custodial account or guardianship, or delay distributions beyond age 21 (in California) you will need to establish a trust for your minor child. The good news is that this can be an "empty trust" (holds no assets) until your death.
Some assets, as a general rule, should always designate a person as the beneficiary (or beneficiaries). Life insurance and IRA in particular. Life insurance policies are income tax free to the beneficiary (but included in your gross estate for estate tax- more on that in a bit.) So, designating a beneficiary other than your trust or estate makes the most sense.
IRAs (Traditional IRAs) have an additional reason to name real people as beneficiaries. You may recall that IRA distributions are taxed as income. When a person, or persons, inherit a IRA account as a designated beneficiary they can: 1) Cash out immediately; 2) Cash out over a five year period; 3) Take the IRA as an "inherited IRA" requiring them to take a required minimum distribution and allowing them to take additional distributions as needed. While the money they receive is still taxed as income, they can stretch the liability over many years- and they can grow the IRA without paying taxes (except on distributions.) Better yet, they can designate their own beneficiaries and continue this cycle for generations. (Until the feds change the rules.)
In contrast, if your estate or trust is the beneficiary of a traditional IRA, they must cash out immediately (Trusts and estates cannot "own" and IRA). As trusts and estates pay the some of the highest income tax rates, this usually is not the optimum answer.
And, of course, if you name no beneficiary for your life insurance or IRA, the assets are subject to probate which may increase cost of administering your estate.
Estate tax planning is less of an issue under the current rules, except for very large estates. The current exclusion amount for 2016 is $5,450,000 (it increases annualy until the feds change the rules.) Also, the surviving spouse gets the benefit of both an unlimited marital deduction (all property going to the Survivor escapes estate tax) and portability (where the survivor gets the unused portion of the deceased spouse's gift and estate tax.)
Of course, this is for Federal Estate Tax- some states may have an estate tax (based on the amount of the decedent's estate) or an inheritance tax (based on the amount the beneficiaries receive), or both.
What this means is that a married couple can effectively shield more than $10,000,000 of property passing to their heirs with a very simple estate plan.
For larger estates (or estates anticipated to grow substantially), there are some additional estate planning devises to avoid estate tax. An ILIT (Irrevocable Life Insurance Trust) is one. An ILIT is a trust which owns an insurance policy on your life, and because you do not "own" the trust the policy is not included in your estate for estate tax calculations. But, they are irrevocable, so you can not change your mind latter. And, ILITs have other administrative, cost and tax considerations associated with them, so a careful analysis is required for their optimal use.
As you can see, the question of "Who should be the beneficiary?" is a more complicated question than it appears, and the advice of a qualified estate planning attorney is generally worthwhile and recomended.
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∙ 2016-05-03 17:20:01
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Should adult children or the surviving spouse be the beneficiary?
The spouse should be the beneficiary.
Does a surviving spouse in Texas have to get surviving children to sign before he sells his home?
That depends on how you and your spouse held title to your property and whether the surviving children are the children of both the decedent and the surviving spouse. You should consult with an attorney.
Is surviving spouse the legal beneficiary of a life insurance policy if a different beneficiary is named?
No, the spouse is not. The beneficiary is named. There are laws that require the spouse to sign an acknowledgement that there is life insurance that she is not the beneficiary of.
What does it mean when the beneficiary of a life insurance policy is the employer but there's a surviving spouse who is not listed as a beneficiary?
Generally, the proceeds will be paid to the named beneficiary. However, the survivor should discuss the situation with an attorney.
If the spouse dies does the money in the joint checking account go to the surviving spouse or to the spouse and surviving children of the decedent?
In community property states, absent a will or beneficiary designation different(and even this might not be enforceable if the wife did not sign). Everything goes to the surviving spouse. Hopefully she likes the children.I am not an attorney but I did go to a Holiday Inn Express today.
In the state of Georgia if a spouse receives life insurance benefits is the surviving spouse responsible for the deceased spouse debt if surviving spouse's name is not on any of the debt owed?
In Georgia, as in most states, life insurance proceeds to a named beneficiary become the property of the beneficiary and are therefore not accessible to the creditors of the decedent. Of course, this does not apply to joint debt between the spouses or any debt solely in the name of the surviving spouse. In short, if the surviving spouse's name is not on the debt of the decedent, the surviving spouse has no legal obligation to pay such debt.
In PA is the surviving spouse responsible for medical bills for a deceased spouse?
In Pennsylvania, the surviving spouse, or whoever is listed in the will as beneficiary, is responsible for medical bills. Any debt incurred would be owed by the living spouse.
If a surviving spouse is not named the beneficiary of a retirement account can this be contested?
if they did not name anyone else then yes it can be contested
Who inherits the estate when there is no will surviving children and grandchildren who are the children of a deceased child?
Generally, the estate of a decedent who dies without a will goes to the surviving spouse. If there is no surviving spouse then to the decedent's children and the children of any deceased child. You can check the laws in your state at the related question l,ink.Generally, the estate of a decedent who dies without a will goes to the surviving spouse. If there is no surviving spouse then to the decedent's children and the children of any deceased child. You can check the laws in your state at the related question l,ink.Generally, the estate of a decedent who dies without a will goes to the surviving spouse. If there is no surviving spouse then to the decedent's children and the children of any deceased child. You can check the laws in your state at the related question l,ink.Generally, the estate of a decedent who dies without a will goes to the surviving spouse. If there is no surviving spouse then to the decedent's children and the children of any deceased child. You can check the laws in your state at the related question l,ink.
Who has the right to a mans possessions after he is dead?
spouse or beneficiary or children
What happens in Alabama If a spouse dies without a will and there are three children and a surviving spouse and there are assets?
the surviving spouse receives an equal portion as each child.
Can a surviving spouse file a claim when they are not listed as the beneficiary in the will?
Yes. In most states in the United States a spouse cannot be disinherited by a will. The spouse can file a claim under the doctrine of election. By filing such a claim, the surviving spouse is generally awarded an intestate share of the estate. You should consult with an attorney in your jurisdiction who can review your situation and explain your options.
