Life insurance, annuities, and IRAs are examples of assets that are not impacted by wills. Beneficiary designation forms are used to determine asset distribution after death.
What you’ll discover:
Annuities on Life Insurance
Planning for Retirement
Beneficiaries for Individual Retirement Accounts (IRAs)
The basis of your estate plan is the creation of a final will and testament. But, keep in mind that certain of your assets may be excluded from the terms of your will. You must decide how these assets will be allocated on an individual basis, using a beneficiary designation form for each. Life insurance, annuities, retirement plans, and individual retirement accounts are examples of assets that are not normally impacted by final wills and testaments (IRAs.)
Table of Contents
Insurance for life
A life insurance policy is a legal agreement between you and a life insurance company. In layman’s terms, you pledge to pay premiums to the life insurance provider. In return, the corporation agrees to pay a certain sum to your beneficiary (or beneficiaries) following your death. By completing a beneficiary designation form, you determine who will be the beneficiaries.
Annuities
Annuities are financial investments in which a person pays one or more payments to an annuity firm (usually a life insurance company.) In exchange, the life insurance company undertakes to invest the money and give the person monthly returns (“the annuitant”). The agreement may provide that return payments will commence on a certain date and cease when the annuitant dies. In other circumstances, payments to a beneficiary selected by the annuitant will continue after death.
Planning for Retirement
Employers develop retirement plans, such as pension plans and 401(k) plans, for their workers. In general, as part of the employment agreement, the employer agrees to make periodic contributions to a retirement plan created by the employer. Your account payments are invested. You do not pay taxes on contributions to your account or profits until you begin receiving withdrawals upon retirement. A beneficiary designation should be established to account for the chance that you may die before collecting all of your retirement benefits.
Many people have retirement plans in which they have collected considerable investment assets with an essential tax feature: these funds reflect income that has not been taxed. In most situations, you cannot withdraw these money without penalty until you reach the age of 59 1/2. When you remove the money, you must pay income taxes on the amount you withdraw.
Individual Retirement Accounts (IRAs) are a kind of IRA (IRAs)
Individual retirement accounts (IRAs) are often utilized by those who do not have employer-sponsored retirement plans. IRA accounts may be opened with banks, brokerage firms, and other financial institutions. Individual payments are sometimes deductible for income tax reasons. These accumulating contributions, as well as the income created by the IRA account, are not taxed until the person starts receiving distributions at retirement. You must submit a beneficiary designation form as part of the IRA account setup procedure to account for the risk that you may die before collecting the entire payout from your IRA account.
Choosing Beneficiaries
Beneficiary designation forms govern the disposition of these assets after death. Unless your beneficiary designations clearly refer to your last will and testament with precise phrasing, your last will and testament does not affect how those benefits are paid. Intangible assets are often referred to using the following terms:
When one joint owner dies, the remaining joint tenant immediately obtains the dead owner’s stake, regardless of the requirements of the deceased owner’s final will and testament.
The payments paid to chosen beneficiaries under a life insurance policy are known as life insurance proceeds.
Retirement plan benefits: Contributions paid from a pension plan or other retirement account to you and your specified beneficiaries.
Annuity contracts: A contract in which you spend a certain amount of money with an insurance company or other investment firm in return for the right to receive periodic payments.
Individual Retirement Account: A restricted investing account into which you may send funds.
If you ever need assistance, contacting with an estate planning attorney is a good option. The expense of consulting with an attorney outweighs the risk of making an expensive mistake.
Related reading:
5 reasons why you should make a will
How to Make a Will
What exactly is a living will?
Further information about wills may be found here.
Begin making your will today.
