Beware the Beneficiary Form

HNW Elder Law, Estate Administration and Probate, Estate Planning

Part 3 of 4
By: Fredrick P. Niemann, Esq.
This is the third post of a four part series on estate planning by use of a beneficiary designation form.

Avoid leaving assets to minors outright. Also avoid disabled people, and in certain cases, your estate or spouse.  If you do, a court will appoint someone to look after the funds, a cumbersome and often expensive process.  Also think about what can happen when the money reverts to the child at age 18 or 21, depending on the state.

I’ve seen 18-year olds receive proceeds from life insurance policies.  While one of them still has her money, “the other two bought and wrecked brand new cars, splurged on clothes, and champagne, lent money to friends and generally went from $150,000.00 to actually owing money in just one year.”  The problems could have been avoided if the parents had set up trusts for the kids payable at, say age 30, and named the trusts as beneficiaries of the life-insurance policies.

Disabled children and adults-require “special or supplemental needs trusts” that preserve their ability to receive government benefits, as even a small outright inheritance can prevent them or disqualify them from getting public aid and assistance.

For retirement plans, the biggest mistake is to name your estate as beneficiary, because that means when you die, the full amount of the plan must be paid out and taxed within five years. Individual beneficiaries, by contrast, could stretch out the distributions and the taxes for decades.  Because many people have a large portion of their assets in retirement accounts, they also should be sure that the combination of the distribution arrangements on those accounts and their wills provide for family members as they wish, particularly in complex situations such as a second marriage when there are children from the first union.

Beneficiary designations are crucial to estates in New Jersey.  For more information please contact Fredrick P. Niemann, Esq. toll-free at (888) 800-7442 or email him at  For further information, please go to to learn more.

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