LaGrange: 1023 W 55th St #200, LaGrange, IL 60525 | Deerfield: 770 Lake Cook Rd #100, Deerfield, IL 60015
LaGrange: 1023 W 55th St #200, LaGrange, IL 60525
Deerfield: 770 Lake Cook Rd #100, Deerfield, IL 60015
LaGrange: 1023 W 55th St #200, LaGrange, IL 60525
Deerfield: 770 Lake Cook Rd #100, Deerfield, IL 60015
This Is the First Step of Estate Planning, and It Only Takes an Hour to Do (Part 2)
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Last week I wrote about beneficiary designations, and today I will finish writing on that topic and talk about different ways these designations may be set.
In the case of many contracts, as well as a will or trust, you can pre-determine how assets might be divided if one or more of the beneficiaries has already passed away before receiving their share of the inheritance.
Suppose a mother has three adult children who are the primary beneficiaries of her life insurance policy. Upon the mother’s death, each of her three children would receive one third of the policy proceeds.
However, what happens if one of her children dies before their mother? This can go a few different ways:
- The mother can choose to leave her assets “per stirpes,” which translates to “branches” or “roots” (like that of a family tree). In this case, if one of the adult children dies before she does, that child’s share would be divided proportionately among their living beneficiaries.
- She could instead choose to leave her assets “per capita,” meaning “by heads.” In the case of one of the adult children dying before their mother, that child’s share of the inheritance goes back to the estate and is divided among the other living beneficiaries. Instead of each child receiving one third of the life insurance proceeds, the 2 surviving children would each be given half of it and none would be passed down to the descendants of the child who had passed away.
Finally, you may want to consider taxes when deciding who you want to be the beneficiary of your accounts. A (non-spouse) beneficiary of a retirement account, for example, would need to withdraw and pay taxes on this money within 10 years of the date of death. On the other hand, life insurance proceeds are non-taxable to the heir but are included in that individual’s estate for tax purposes.
You can take this important and quick step to add beneficiaries to an account or update your beneficiary designations by calling your provider or going to their website. You will usually need basic information about your beneficiary, such as their full name, date of birth, and Social Security number. This process is well worth the small amount of time it takes to complete.
For assistance creating or updating your estate plan, contact us at Wilson and Wilson Estate Planning and Elder Law, LLC at 708 482 7090 for our main office in LaGrange, Illinois or at 847 656 8958 for our Deerfield, Illinois office.
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