One of the most important steps when putting together a Last Will & Testament is deciding on the beneficiaries of your estate. As the testator (creator of the will), you can choose anyone as your beneficiary.
A beneficiary is any person or organization granted a portion of your estate after you pass away. Most states have no restrictions or guidelines concerning the beneficiaries of a will, other than the party must be living.
While it is common for the spouse to be the primary or sole beneficiary in a will, it is not a legal requirement; the testator may leave their estate to whoever they choose. Some states offer "inheritance protection" to spouses. This means that your spouse is the automatic recipient of certain financial accounts like 401ks and pensions. Your spouse can release their claim to that part of your estate by signing a legal waiver.
Common-Law or Community Property
It's essential to understand your state's property laws when creating your will because some states interpret property ownership differently.
If you live in a community property state, all assets and property gained while married are considered the property of both spouses. The community property states in the US are:
All other states are common-law states. Assets and property gained during marriage are not automatically considered the property of both spouses. Unless explicitly stated in documentation, any property you purchased while married is solely owned by you.
Minor Children as Beneficiaries
You can leave assets and property to a minor, but, by law, any beneficiary under 18 cannot receive their portion of the estate directly. A child's inheritance can be placed in a trust and managed by a trustee or the child's legal guardian until adulthood. You have the option to create a living trust or a testamentary trust for the children.
Organizations as Beneficiaries
You can choose to add an organization as one of your beneficiaries. This option may require additional and specific instructions for your chosen executor. Check any tax laws that may affect your gift to the organization; the last thing you want to give to charity is a heavy tax burden.
After you have considered your primary beneficiaries, you may want to include instructions for alternates.
Consider this scenario: you have named your sister as your primary beneficiary, but she passes away shortly before you. What happens to your estate? It's always wise to have a backup plan detailed in your Last Will & Testament.
No Beneficiaries Named
The probate court will become responsible for your assets and property if you die without creating a will or naming any beneficiaries to your estate. In most states, your closest relatives will receive most or all of your estate.
Double Check All Information
Pay close attention to the information you include in your will regarding your beneficiaries. Make sure that all names are spelled correctly to avoid delays in the probate process.
Use the full legal name of each beneficiary; the court will not accept nicknames or abbreviations. If you list an organization as one of your beneficiaries, include specific contact information. Too much information is always better than not quite enough.
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