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BENEFICIARY DESIGNATION CONTROLS WHO INHERITS IRAS, ANNUITIES, AND LIFE INSURANCE

By Carolyn E. Hartle, Esquire, Dec 11 2017 03:33PM

One common misconception I repeatedly encounter is the belief that the Last Will and Testament controls who will inherit the individual’s IRAs, life insurance policies, and annuities. However, this is only true if the individual failed to name a Beneficiary on the IRA, life insurance policy, or annuity because then the Estate becomes the Beneficiary by default. However, this is not what should be done.

In most cases, the owner of these types of assets will complete Beneficiary forms with the company who sold him/her the IRA, life insurance policy, or annuity. Then, upon the death of the owner of these types of assets, the Beneficiary receives these funds quickly and outside of probate. Since the Beneficiary form sets forth who shall receive these funds, the Decedent’s Last Will and Testament is not used.

When designating a Beneficiary on the before-mentioned types of assets, you should name a primary Beneficiary, as well as a contingent Beneficiary. By doing so, you remain in control of who receives these funds. If you name a primary Beneficiary and not a contingent Beneficiary and your primary Beneficiary predeceases you, then your Estate becomes the Beneficiary of these funds.