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Beneficiary Designations
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Beneficiary Designation Lawyer in Grand Rapids
Get Clear, Straightforward Answers to Your Beneficiary Questions Here
Your estate plan in Michigan can include several documents, many of which may require beneficiaries, like any trusts you may have set up or intend to set up and non-probate assets like 401(k), IRA accounts, life insurance policies, and pensions. Assets from these accounts will go to the beneficiaries upon your death. It is important, therefore, to make sure you choose your beneficiaries carefully.
You may think it’s a simple thing to do: choose those closest to you whom you want to benefit from your estate and your life’s work. Sometimes, however, it is not as easy as that. There are many different factors to consider and different types of beneficiaries to identify. At Inhulsen Law, our estate planning team based in Grand Rapids handles all types of estate plans and can explain the importance of beneficiary designations so that you are confident in your choices.
Contact us today at (616) 345-2810 to make sure your estate plan includes the beneficiaries you want to protect if anything should happen to you.
Beneficiary Designations
A beneficiary designation involves naming the person who will directly receive an asset in the event of the death of its owner. Assets that allow for beneficiary designations include insurance policies, retirement accounts such as 401(k) plans, annuities, and other financial accounts. Trusts also require beneficiary designations. You can also choose beneficiaries in your Last Will and Testament.
To note, beneficiaries are slightly different from heirs. Beneficiaries are chosen while heirs (though they can be chosen) are those who inherit the property of a person who dies intestate, or without a will.
The designation process ensures the named beneficiary directly receives the asset, rather than it passing to the estate and going through probate, which can cost significant time and money.
Common Types of Beneficiaries in Michigan
Common categories of beneficiaries include eligible designated beneficiaries, designated beneficiaries, not designated beneficiaries, and contingent beneficiaries. Different eligibility rules may apply to different types of beneficiaries.
Eligible Designated Beneficiaries
Eligible designated beneficiaries include:
- Spouses
- Children under 18 years of age
- Individuals with a disability
- Chronically ill individuals
- Individuals within 10 years of age of the deceased
Eligible designated beneficiaries have additional rights to designated beneficiaries.
Designated Beneficiaries
A designated beneficiary is any living person who does not fall into the above categories. This may include a friend or extended family members, such as elderly parents or a sibling.
Not Designated Beneficiaries
A not designated beneficiary is a non-living beneficiary, such as a charity, trust, or estate.
Contingent Beneficiaries
A contingent beneficiary is a “backup” beneficiary who receives the asset in the event the primary beneficiary is unable to.
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What Documents in An Estate Plan Need Beneficiaries Listed?
Most non-probate assets and documents require at least one beneficiary to be listed. This includes:
- 401(k) accounts
- Pensions
- Life insurance policies
- Revocable trusts
- Irrevocable trusts
Typically, non-probate assets are not placed in a Will because a Will goes through probate. Beneficiaries will override anything else, too, like other heirs in a Will.
Factors to Consider when Choosing a Beneficiary in Michigan
When choosing a beneficiary, here are some points to keep in mind.
Age
A beneficiary typically must be over 18 years of age. If you want to gift an asset to a minor upon your death, you may need to set up a trust and designate the trust as the beneficiary.
Financial Support
Your financial dependents are a good starting point when considering who to designate as a beneficiary. This may include your spouse, children, or other extended family members.
Insurable Interest
A beneficiary generally must have an insurable interest in the insured person. This means there must be a legitimate financial interest between the two, such as in the case of dependent children or a spouse.
Policy Specific Rules
Some life insurance policies or pension funds set rules for designating a beneficiary. Make sure you are aware of these before making your decision and seek legal and financial advice about your options.
Revocability vs. Irrevocability
Depending on the document and the terms of the contract, some beneficiaries may be irrevocable. This means you cannot revoke their rights unless they agree to it. At first glance, you may wonder why you would want to designate beneficiaries as irrevocable, but there are benefits. An estate planning firm can illuminate the reasons and situations where irrevocable beneficiary designations may be most appropriate (or not).
