Ohio residents can designate loved ones to be beneficiaries of accounts such as life insurance policies and IRAs. They should carefully consider their designations and should know what should and should not be done. Emotion may play a significant part in how investors choose their beneficiaries. Investors should consider who they care for the most and would want to ensure are financially stable.
People should also understand how spousal beneficiaries may be taxed if they are left certain types of property. In some cases, it may be more sensible to name a spouse as beneficiary. Surviving spouses may receive better tax benefits than a surviving sibling if they receive 401(k)s and IRAs, which they can transfer to their own accounts.
Beneficiary designations should also be reflected in estate plans. People will want to make sure that their trusts and wills do not contradict the beneficiary designations on financial accounts. Regardless of which was completed first, beneficiary designations will generally take precedence over what is in estate planning documents. An attorney may advise how people can update their designations to be in line with the estate plan.
One thing to avoid is assigning assets to minor children outright, as they are unable to inherit assets directly. It may be left to the court to designate a custodian to manage the assets until the children become of age. To prevent this, parents can transfer funds into a 529 plan or similar account that the children may have access to once they attain majority. An estate planning attorney may advise clients on the best types of documents to use for their particular set of circumstances.