As you plan ahead towards retirement, it’s important to consider your beneficiary structure. Whether you’re passing assets through trusts, wills, life insurance or an IRA, you need to have a clear understanding of the estate planning tools that can and cannot be used to pass these on.
The default way to give assets to someone is to outright retitle it in their name or gift it to them. There are potential pitfalls with this when it comes to your estate, however. For example, giving a big lump sum to a person in one year may trigger a gift tax and also allow that person to spend all of that money as quickly as they’d like on whatever they want. That may not be your intention.
Most assets can be left to others in multiple ways, including joint ownership, assets owned by a trust, assets contractually passing through instructions with a financial institution, or stipulations in a deceased’s will. You might use one or more of these together in your total estate plan.
Real property, for example, can either be planned for in the will or jointly owned. You might choose to jointly own the property so that if you pass away, your spouse is able to take over ownership immediately and without other court intervention.
Note that some assets must pass through beneficiary designation, such as life insurance policies and some retirement accounts.
You may have a mix of various strategies that combine to help you pass on assets to your loved ones.
Determining the most appropriate methods that allow your loved ones to receive these assets with minimal tax consequences and as easily as possible may be important to you. Consulting with an estate planning attorney who has helped many other people in these circumstances document, implement and execute their estate plans can give you confidence and peace of mind about the future. Make sure you have the right mix of strategies and tools in place to accomplish your individual estate planning goals.