I’m a Financial Expert: 3 Key Roles of Beneficiaries in Estate Planning
Written by
Laura Bogart
Edited by
Ashleigh Ray
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Though estate planning can be a complicated process, it’s also an act of love. Making your wishes known to your beneficiaries, while ensuring that they are provided for as best as you can, is the ultimate show of compassion.
Good estate planning can be oriented around your own thoughts and feelings, but it’s also very much about your hopes for your beneficiaries. But how exactly do you center them as you create your plan? What are the key roles of beneficiaries in your ultimate plan?
GOBankingRates connected with some experts to learn more about the unique and central function beneficiaries play in estate planning.
Your Beneficiaries Reflect Your Legacy
When you hear the term beneficiaries, you likely think of your relatives or very dear friends.
According to Lindsay Graves, founding partner at the Graves Law Firm, this is very often the case. However, you also have the option to leave your money with organizations and charities that reflect your values.
Graves said that choosing your beneficiaries can help you define what you’d like your legacy to be.
“For example, if all of your children are doing well financially, you may wish to leave a legacy of generosity to a cause near and dear to you or you may wish to leave everything to your grandchildren to help them with their education or buying a house,” she added.
In some families, there might be a tradition of children inheriting a family business or a strong belief in passing down generational wealth. For Graves, the decisions all come back to the legacy you want to create.
“Consider what will give you peace of mind as you go to bed at night [knowing] that you have created something that will live beyond you,” she said.
You Have the Freedom To Change Your Beneficiaries
If you’re worried that once you choose a beneficiary, their name is essentially written in stone, you don’t need to. As Graves explained, unless you have created an irrevocable trust without retaining a power of appointment, you have the freedom to change your beneficiaries.
Beneficiaries established in your will or listed on your accounts can be changed easily through simple paperwork. All financial institutions, such as banks or insurance companies, have their own change of beneficiary forms that you can call to request, and then complete and return.
“For an update to your will, you simply need what is called a codicil, which can be used to amend your chosen beneficiaries,” Graves continued. “Within a trust, you can retain (and subsequently exercise) a power to appoint the assets of the trust among different beneficiaries.”
You Have a Say in How Donated Funds Are Used
You might be concerned that a donation to a charity or other organization, like a college, might go into a big pool of their institutional needs, instead of the vision you have in mind for your money.
The good news is that if you’re passionate about helping your local humane society’s spay-and-neuter clinic or want to contribute to a scholarship fund, you can take steps to ensure that your beneficiary honors your wishes.
“Charities must use the funds for the purpose listed in the beneficiary designation,” said Tracy A. Craig, a partner and chair of the Trusts and Estates Practice Groups at the Seder and Chandler law firm.
“So, if you leave funds to your college for scholarships, the college must then use the funds for scholarship. If you are leaving funds to charities for a very specific purpose, it’s best to check with the charity to ensure that it will be able to fulfill the request.”
One other note about donating to a charity: Craig said to be extremely careful about ensuring that you have the correct legal name of the charity or organization to make sure that your contributions go to the right organization, since a lot of charities can share similar names.
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