What To Know About Naming Beneficiary Designations Following The Secure Act

Tax advantaged accounts, such as IRAs and qualified retirement plans like 403(b)s or 401(k)s require specific estate planning strategies. Creating a trust in and of itself may not be enough to protect the estate planning intentions of the creator of that trust. Revocable living trusts are usually funded with a person’s real estate, non-retirement financial accounts and bank accounts.

In a trust the person states where their assets are going when they pass away and names a backup plan as well. A trust, however, does not control any assets outside of the trust, such as tax advantaged retirement accounts that pass through beneficiary designation forms filed directly with the company manager. In January of 2020, the passing of the SECURE Act changed the rules about inheriting retirement accounts, and now forces earlier distribution and therefore tax consequences on everyone except a few specific people.

Beneficiaries typically fall into a few categories: the spouse of the person who owns the account, non-spouse individuals, such as children, and entities like charities or trusts. Each of these beneficiaries will have different options for what to do when they inherit a tax advantaged account. For people other than spouses with a few rare exceptions, they must receive all account assets within 10 years of the account owner’s death.

Spouses have the most discretion over these situations in that they can consolidate the inherited account into their own tax advantaged account, take a lump sum payment or roll the funds into an inherited IRA. Entities, including certain types of trusts, can include multiple options such as lump sums within five years of the account owner’s death or distribution over the expected lifetime of the account holder. Set up a time to work with an experienced estate planning lawyer to discuss your options.

What Are The Rules For Naming A Beneficiary For Your 401(K)?

When you sign up for a 401(k) plan administered through your work, you will be asked to name beneficiaries. These are people who would inherit the account if you passed away. It is often overlooked once someone has created this account because it is important to come back and update this material as your life needs change. You will be asked to name two different kinds of beneficiaries.

The first is a primary beneficiary, and this person is your first choice to receive assets inside the 401(k). The primary beneficiary is usually your spouse if you’re married unless you specify otherwise.

Contingent beneficiaries are one or more backup beneficiaries who are eligible to receive the assets inside the 401(k) if your primary beneficiary passes away or declines to accept that inheritance.

You can name multiple people in each category. If you pass away without naming beneficiaries on your 401(k) account, the 401(k) will usually end up in probate court. This can be a very slow and expensive way to distribute your assets and possibly the last thing you want your beneficiaries to deal with. Naming 401(k) beneficiaries is strongly recommended to make the asset transfer process simple.

If you’re single, you’re able to name almost any entity you want as your beneficiary, but review them periodically to keep it current. If you’re married, your spouse will receive 100% of your 401(k) if you have not designated the beneficiary when you pass away. You will usually need your spouse’s permission to pass on your 401(k) to someone other than your spouse.

Remember that if you choose to name your children as your primary beneficiary of your 401(k), if they are minors, they cannot inherit it directly, meaning that a guardian must be appointed to oversee the use of the funds inside the account.

Talk to a Virginia Beach lawyer about how this beneficiary designation fits into your broader estate planning.



What To Know About The Two Basic Kinds Of Life Insurance Beneficiaries

Close up on a file tab with the word life insurance, focus on the main text and blur effect.Most people who take out a life insurance policy are doing so to help protect their loved ones in the event that the primary policyholder passes away unexpectedly. This can be an important financial contribution to continue supporting your loved ones and it is imperative that you understand how the policy works. The policy is taken out under a specific face amount, which is the lump sum that your family or chosen beneficiaries will receive when you pass away.

So long as the policy is maintained as active through regular premium payments, your loved ones will be able to file a claim with that life insurance carrier when you pass away. It is on you to decide on a life insurance beneficiary to receive those assets after you pass. There are a number of financial, tax and legal related implications that can all happen if you do not appropriately name a beneficiary. This means understanding the difference between primary and contingent life insurance beneficiaries.

A primary beneficiary is the people or persons who will receive the proceeds of the policy when the insured owner passes away. However, the beneficiary is not eligible to receive any proceeds if they pass away before the death of the insured party.

A contingent beneficiary is also known as a secondary beneficiary. This contingency beneficiary is only eligible to receive proceeds on a policy if the primary beneficiary passes away before the insured party. This makes it extremely important to understand how to select an appropriate life insurance policy and to name both primary and contingent beneficiaries to support your family’s unique needs. Make sure that a life insurance policy is part of your established estate plan by working with an experienced and knowledgeable estate planning lawyer in Virginia Beach.

What Does Contingent Beneficiary Mean on My Retirement Form?

You must designate individual beneficiaries for your retirement plans at the time you establish these accounts as well as on an ongoing basis if the needs of your life change. The easiest way to think about this is that your primary beneficiary might be the one person that you choose to receive assets from your assets account if you pass away before you are able to use all of the assets inside. In most cases, this will be your spouse.


A contingent beneficiary, however, is the person who is eligible to receive these assets if the original beneficiary passes away first. It is a good idea to always name a contingent beneficiary so that you can keep all of the benefits of having retirement assets like those in a 401(k) pass outside of probate. You may wish to revisit your primary and contingent beneficiary plans on an annual basis or after every major life event. For example, you might want to update your retirement plan beneficiary if you have recently gotten divorced.

This is a commonly overlooked aspect of post-divorce planning which means that your ex-spouse could be legally entitled to receive assets from your retirement account if you fail to update this account accordingly. Set aside a time to speak with an experienced estate planning lawyer about the best options for your retirement planning future.

Make sure you review your beneficiary forms at least on an annual basis. If anything changes in your life, such as the birth of a new grandchild or the death of a primary beneficiary.

Our estate planning law office can help you with your beneficiary forms, although they will be filed directly with the company maintaining the account.



What Is a Designated Beneficiary?

Have you set up your retirement account with your employer or recently applied for life insurance? In either of these circumstances, you’ll need to choose someone to receive the assets inside these accounts/policies when you pass away. In general terms, this person is referred to as a beneficiary.

Completing aspects of your retirement plan requires you to name beneficiaries. A designated beneficiary is an individual who receives an asset like the proceeds of a life insurance policy or the balance in your individual retirement account after the death of the asset’s owner.

Per the Setting Every Community Up for Retirement Enhancement Act, the rules for designated beneficiaries have been narrowed and refined when it comes to the required withdrawals that must be taken from retirement accounts inherited from other people. A designated beneficiary is named on a policy or financial account as the recipient of the assets inside the account in the event that the account holder passes away.

A designated beneficiary must be a living person. A non-person entity cannot be a designated beneficiary even if the creator and owner of the account named a non-person entity. In order to receive the assets the designated beneficiary needs to contact the account manager to file a formal claim and provide a copy of the death certificate to receive their benefits.

Need more help with your Virginia Beach estate planning? Reach out to our office today to learn more.




What a Trustee Needs to Know About Making Final Distributions to Beneficiaries

Although beneficiaries of a trust will naturally have questions earlier on in the process, the concept of when they’ll receive their check or the assets set aside for them usually needs to be answered later on. Making distributions of remaining trust assets comes at the end of the process when a trustee is settling a revocable living trust.

This is because the successor trustee has to ensure that every single expense and fee associated with administering the trust or the related probate estate have been settled and that all taxes have been paid or money has been set aside to pay those final taxes and bills. If the trustee chooses to make distributions to the beneficiaries and expenses come up down the line, that person will then have to pay those expenses out of their own pocket.

If it is anticipated that the administration of the decedent’s trust will take longer than 12 months, the successor trustee might need to reach out for additional resources, such as hiring a trust attorney and an accountant.

This can ensure that enough assets are appropriately set aside to pay ongoing expenses of the trust and then allow for those final important distributions to be made to the beneficiaries of that document. Schedule a consultation today with a trust planning lawyer in Virginia Beach to learn more.

What Is Disinheriting a Beneficiary?

You’ve probably heard plenty of advice that you need to distribute your assets in your estate in a streamlined manner using estate planning documents. This is a basic tenet of the concept of estate planning and can be very beneficial for ensuring that your loved ones have an easier time receiving your assets in the future. However, you might have questions about when not to include someone in your estate.

Many people are surprised to learn that disinheriting a beneficiary or excluding them from receiving assets inside your estate is more common than you anticipate. It may be as a result of a beneficiary’s lifestyle choices, such as concerns over them being a spendthrift or a current addiction.

Furthermore, you might have a family member who is disabled and cannot receive assets directly without compromising their government benefits. When it comes to disinheriting, it is a best practice to explain either in a separate letter or in your core estate planning documents the reasons behind your decision. This can help to minimize the possibility of conflict or confusion in the future.

Hard feelings among family members can turn into legal conflicts and arguments that your estate is invalid. This can decrease the overall value of your estate and lead to in fighting among family members.

It is always best avoided where possible. For more information about the process of establishing estate planning documents that transfer assets to some and disinherit other beneficiaries, you’ll want the support of a Virginia Beach, VA estate planning lawyer.  


What Is a Payable on Death Account?

You might discover in the process of administering someone else’s estate or in structuring your own estate the existence of a payable on death account. A POD account is an arrangement between a credit union or bank and a client that designates the beneficiaries who will receive all of the assets belonging to that client.

This immediate asset transfer is triggered when the client passes away. Any person with a certificate of deposit at a bank can determine a beneficiary who is eligible to inherit any money in the account after his or her death. A named beneficiary on such a bank account will be referred to as the payable on death account.

One of the primary reasons that people opt for payable on death accounts in Virginia is to keep this money inside a bank account outside of probate court in the event that the owner of the account suddenly passes away.

Designating a beneficiary is an easy and free service that allows for the transfer of savings bond, savings accounts, checking accounts, security deposits and other deposit certificates. In order to do this, you must visit your credit union or bank to discuss it.

Your primary responsibility here is to notify the bank of who the beneficiary should be. A completed form filed with the bank will give that financial institution the right authorization to convert the account to a payable on death.

The beneficiary named in a POD account is not eligible to receive any of the money in the account while the account holder is still alive. However, when the owner of the account passes away, the beneficiary becomes the automatic owner of the account allowing this to bypass the traditional estate process. Want to create other tools for estate planning? Schedule time to speak with a VA Beach estate planning attorney.



Do I Really Need Life Insurance Beneficiaries?

So you already have a life insurance policy in place as part of your estate plan- smart move. As part of your application and final policy approval process the company probably gave you a beneficiary form.

This form is extremely important and should not be ignored. Even if you write in your will that your life insurance policy will be given to a certain family member, you should know that the forms filed with the insurance company for your beneficiaries take precedence when your estate is administered.

This is also because your estate passes outside of the traditional probate process. These forms are key for telling the insurance company who gets all or part of your policy proceeds, so they should be filled out and then reviewed each year as well.

If you’re new to life insurance as part of your overall estate plan, you are not limited to just one beneficiary. You can list both a primary and contingent beneficiary so that there’s a backup, and you can split the proceeds of the policy between different parties so long as you allocate these percentages properly on the beneficiary forms.

Most people use life insurance policies to help when there is a need for general living expenses or for a big expense like paying off a mortgage or for a child’s college tuition. Since a will can get tied up in probate for a long period of time, the life insurance policy can help your family get back on their feet sooner rather than later.

In conjunction with a will, a trust, and other estate planning tools, you’re empowered to cover a lot of bases with your Virginia estate plan. If you have questions about the process or need help creating these documents, a Virginia estate planning lawyer can help you create a comprehensive and unique strategy.

What You Need to Know About Using Minors as Primary Beneficiaries

Estate planning issues that have to do with children can be extremely complex. Minor children are usually only able to own a small amount of property directly in their own names.

This is why many parents choose to use tools, such as a trust, to pass on property to their children through the management of a trustee. The amount that minor children can accept outright in their own name varies from one state to another, so it’s important to discuss with your individual estate planning attorney what to expect.

Any property that belongs to a minor beyond that amount has to be legally supervised and controlled by an adult. If you are considering leaving behind a substantial gift to a minor, you should select an adult to be responsible for it.

You have two major options when preparing to pass on property beyond the allowable amount. These include:

• Leaving the gift to the child and naming an adult able to be responsible for supervising it. The adult can be one of the parents of the child but does not have to be directly.
• Leave the gift to the other parent who is eligible to use it for the child’s benefit. If the parents can cooperate and get along with another and can trust that any money will be managed well, this is usually the simplest way to address the matter.

For more helpful comprehensive estate planning issues having to do with children, schedule a consultation with a lawyer today.