Absolutely, naming alternate, or contingent, beneficiaries is a critical component of comprehensive estate planning, and a question Ted Cook of a San Diego estate planning firm addresses frequently with clients; it’s a proactive step that safeguards your wishes and prevents unintended consequences should your primary beneficiary be unable or unwilling to accept their inheritance.
What happens if my primary beneficiary dies before I do?
This is a common concern, and the answer lies in proper beneficiary designation. If you haven’t named a contingent beneficiary, the assets will likely fall into your estate, subjecting them to probate—a potentially lengthy and costly legal process. Probate fees in California, for instance, can range from 4% to 8% of the gross estate value, and that’s *before* legal fees. Naming a contingent beneficiary avoids this, allowing the assets to pass directly to the alternate without court intervention. It’s not just about avoiding probate either; consider situations where a primary beneficiary might disclaim the inheritance due to their own financial circumstances or personal beliefs – a well-drafted estate plan with contingent beneficiaries ensures your assets still go where you intend.
Can I name multiple alternate beneficiaries?
Yes, you absolutely can, and in some cases, it’s advisable. You can designate a tiered system, where one alternate receives the assets if the primary beneficiary declines, and another receives them if *both* the primary and the first alternate decline. This provides a robust safety net. Consider a client, Mrs. Davison, who initially named her daughter as the primary beneficiary of her life insurance policy and her son as the alternate. However, her son had a history of financial instability, and she worried about him mismanaging the funds. Ted advised her to name a trust for her grandchildren as the second alternate, ensuring the funds would be used responsibly for their education. This added layer of protection gave Mrs. Davison peace of mind.
What if my alternate beneficiary predeceases me?
If an alternate beneficiary dies before you, their share typically reverts back to your estate, again potentially triggering probate. However, you can mitigate this by designating a “per stirpes” designation, meaning the alternate beneficiary’s share passes to their descendants. For example, if you name your son as an alternate and he has two children, his share would be divided equally between them if he dies before you. It is also important to keep these beneficiary designations up to date, as life events like births, deaths, marriages, and divorces can significantly impact your desired distribution plan. Approximately 60% of Americans haven’t updated their estate plan in the last five years, leaving them vulnerable to these types of issues.
I named my sister as a beneficiary, but we had a falling out – can I change it?
Absolutely. Beneficiary designations are entirely revocable during your lifetime, as long as you have legal capacity. You can change them at any time, for any reason. I recall a gentleman, Mr. Abernathy, who named his business partner as the beneficiary of his sizable retirement account. Years later, they had a bitter professional and personal dispute. He was reluctant to change the designation, fearing it would escalate the conflict. Ted explained that protecting his family’s financial future was paramount, and he should prioritize their needs over maintaining a strained relationship. He promptly updated the beneficiary designation to his wife and children. It’s not about punishing anyone; it’s about ensuring your assets are distributed according to your current wishes. Proactive adjustments, guided by an estate planning attorney, can prevent years of legal battles and emotional distress after you’re gone. Remember, a well-structured estate plan isn’t just about transferring wealth; it’s about protecting your loved ones and preserving your legacy.
“Failing to plan is planning to fail.” – Alan Lakein
Who Is Ted Cook at Point Loma Estate Planning Law, APC.:
Point Loma Estate Planning Law, APC.2305 Historic Decatur Rd Suite 100, San Diego CA. 92106
(619) 550-7437
Map To Point Loma Estate Planning Law, APC, a wills and trust attorney near me: https://maps.app.goo.gl/JiHkjNg9VFGA44tf9
- wills and trust attorney near me
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About Point Loma Estate Planning:
Secure Your Legacy, Safeguard Your Loved Ones. Point Loma Estate Planning Law, APC.
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