It is important to remember that some of your assets are not controlled by the provisions of your will. For example, real estate is often held jointly with rights of survivorship and transfers outside of the will to the survivor. In addition to real estate, there are several types of accounts and policies that are controlled by a beneficiary designation such as retirement accounts and life insurance policies.
Consulting with your financial advisor about the use of beneficiary designations can lead to less income taxes being owed by your estate. Even though the vast majority of estates currently will not have an estate tax liability, most will have to pay income taxes during the year(s) the estate is open. Minimizing income taxes through better control of the transfer process and its timing is a worthwhile effort.
While getting your overall estate plan in order, consider the beneficiary designations of retirement accounts, life insurance policies, and any other property with beneficiary designations or transfer on death instructions. Often the beneficiary of these types of property are the spouse, and the children are likely the secondary beneficiary. If the designated beneficiaries predecease you, your estate will be the beneficiary by default; alternatively, consider making your favorite nonprofit organization a partial or final beneficiary in the event of the death of the other named beneficiaries.
These accounts and policies can be the way to support your favorite nonprofit organization after your death. When a nonprofit is listed as the beneficiary, no income or estate taxes will be owed by the estate, allowing more funds to be available for other uses. That makes using retirement fund accounts the smartest choice for charitable gifts made through your estate.
Having the transfer of these types of assets controlled by the beneficiary form can also lower estate administration costs. In West Virginia, the executor must charge a lower fee on this type of account if a specific recipient (a person or a nonprofit) is named than on the assets and accounts controlled by the terms of the will. Also, using the beneficiary form to handle the transfer of those assets generally means they will be transferred more quickly to the recipient because a simpler process is involved.
To update the beneficiary on such accounts or policies at any time, contact the bank or insurance company who can provide you with a change of beneficiary form. Changing the beneficiary does not affect current use of the account or policy, but can help you to leave a legacy for the future of your favorite non-profit organization.
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