As an estate planning and probate attorney, it is always interesting to see what clients and/or decedents have done with regard to beneficiary designations on their various assets.  When a new client (throughout this essay I may be referring to a single person and to a husband and wife as a “client”) come to see me, after I have spent time getting to know them, I eventually ascertain the assets that comprise their estate.

Frequently clients have a haphazard list of beneficiaries.  Even if they have been consistent, it may not be well thought out.  I suggest that everyone, whether you have a living trust, a will, or not review your beneficiary designations.  Here are some things that you should consider. 

1.  Understand the Fundamentals

Beneficiaries can be listed for many types of assets, including, but not limited to, life insurance policies, retirement plans and annuities.  Furthermore, payable on death or transfer on death can be done on many accounts at the bank.

Virtually anyone and anything can be listed as a beneficiary.  The obvious choices are spouses, children, trusts, and charities.  When a beneficiary is named, the asset will be paid to the listed beneficiary.  This may or may not be what you would have wanted.  You may have gotten married (or divorced) since you named the beneficiary.

This leads us to point number two.

2.  Maintain Current Designations

Undoubtedly if you visited with an estate planning attorney and you undertook an estate plan, whether it be living trust based or will based, the lawyer asked you to provide him or her a list of your assets.  More than likely, he/she asked you for the beneficiary designation. 

However, if you have not met with an attorney, or if it was several years ago, or if there have been significant changes in your life (e.g. divorce, marriage, birth or death), you may need to change beneficiaries.

3.  Taxes are always Lurking

This is where an estate planning attorney can be especially helpful.  Just because an asset has a beneficiary on it, does not mean that it is not part of your estate.  Keep that in mind for potential estate taxes (this year one can have $2,000,000 without there being any federal estate tax and in 2009 the amount is $3,500,000).  Also, when distributions are taken on retirement assets, taxes have to be paid.