Our first response to this question is by asking our Clients a different question: Do you ever drive in the same car as your loved ones? If this is your current situation, you have certainly put yourself in a better position than most people.
As we tell our clients, “the ultimate goal to ensure you avoid probate is to make sure that no assets end up in your sole name, with no beneficiaries assigned”. These designations allow the beneficiaries to receive your accounts, and other assets, often without having to endure the probate process.
There are, however, serious disadvantages to the beneficiary designations. First, you lose the flexibility to divide your assets into shares for your loved ones. With a proper Estate Plan, you can choose exactly who can receive how much, and even place conditions on the distributions.
You can also choose responsible people to protect distributions for minors and individuals with special needs, while avoiding probate.
Additionally, there are many assets, including your personal belongings, that cannot be distributed through beneficiary designations.
Trying to leave your home to a beneficiary by placing them on the title will lead to costly unintended consequences.
Most importantly, there is always the chance that your beneficiary passes before you, or even at the same time. This is why we bring up the “driving-with-loved-ones” question – it quickly shows how easily things can go wrong.
If this happens, then the account will have no beneficiary and will have to go through probate. This is extremely difficult to consider, especially when the beneficiary is your child.
In this unpredictable world, however, you want to make sure that your planning includes these considerations. The biggest advantage of a Revocable Living Trust, for example, is that it cannot predecease you; as such, it serves as the best beneficiary for many of your accounts.
Your current beneficiary can still be the person who receives these assets from your account. If they do happen to pass before you, your Estate Planning documents can also designate alternative beneficiaries to ensure that your money goes to the loved ones of your choosing.
Please call us at 301-696-0567 or self-schedule at lenaclarklegal.com if you would like help protecting your assets and loved ones in the event of death or disability.
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