Beneficiary Designations

Are Beneficiary Designations Enough in a Texas Estate Plan?

Published on: October 21, 2024 | By Thomas W. McCulloch

Several weeks ago on our blog, we discussed the importance of beneficiary designations and how they relate to estate planning. Is it true, though, that beneficiary designations alone can create a comprehensive estate plan? The answer, unsurprisingly, is no. But what else does an estate plan require? And how can you tell what should be listed under a beneficiary designation vs. what should be included in other provisions of the estate plan?

What is a Beneficiary Designation?

By way of review, a beneficiary designation is the act of naming an individual who will inherit a part of the designator’s estate. Beneficiary designations apply to several kinds of financial projects, including life insurance policies, retirement accounts, and financial accounts. Importantly, beneficiary designations do not apply to many other kinds of assets.

What Else is Needed in an Estate Plan Besides Beneficiary Designations?

Because the beneficiary designation applies only to a subset of assets, it is important to utilize another tool. such as a will or trust, when drafting your estate plan. Wills, for example, cover all of your assets, and trusts can help you avoid probate while still passing money and property onto your loved ones. In combination with at least one of these tools, the beneficiary designation helps your heirs understand how you intend to distribute the assets available to you. It is wise to always keep an eye on your beneficiary designations, in case your plans or priorities change down the line.

The Importance of Beneficiary Designations

Published on: September 30, 2024 | By Thomas W. McCulloch

As you think through your estate plan, it is important to be thoughtful about your beneficiary designations, especially as they pertain to your life insurance policy, retirement plan, and financial accounts. What’s more, you should consider updating your beneficiary designations regularly, in order to make sure your estate plan reflects your current circumstances and wishes. On today’s blog, we cover some of the basics regarding beneficiary designations and how they relate to your estate plan.

What is a Beneficiary Designation?

In the legal world, a beneficiary designation is the act of naming an individual who will inherit any part of the designator’s estate. When the designator dies, that person’s assets then go to his or her named beneficiaries.

Why is Beneficiary Designation Important?

If you fail to name a beneficiary or beneficiaries in your estate plan, the state of Texas is left to divide your assets according to the laws of intestacy. These laws essentially dictate which members of the decedent’s family receive the estate. The order of intestacy does not always reflect the decedent’s wishes, and it makes it difficult for other family members and loved ones to contest the distribution of assets.

Are Adopted Children Entitled to Inherit Under a Texas Will?

Published on: November 22, 2023 | By Thomas W. McCulloch

For parents that have adopted children, it is important to understand how the law understands adopted children to be part of their families. In the estate planning process, our clients that have adopted children often want to make sure that their kids are well taken care of after their passing. Today, we cover whether adopted children are able to inherit once their parents die.

Under the law in Texas (specifically, Texas Estates Code Section 201.054), adopted children are considered the children of their adopted parents. Therefore, even if a child is adopted, that child inherits as if he or she were the biological child of his or her parents. This comports with adoption laws nationwide, which generally consider an adoptive child to have the exact same rights and privileges as a biological child.

Importantly, this section applies to children adopted through formal procedures; thus, if you have “informally” adopted a child, or if you consider a child to be like your adopted child, this section will not apply to you. The State of Texas must recognize the familial relationship in order for this provision to treat you and your adopted children as though you are biologically related. Understanding this is crucial to avoid one of the more common estate planning mistake among adoptive families.

5 Reasons Beneficiary Designations Don’t Work Well for Estate Planning

Published on: September 20, 2022 | By David W. Miller

It’s no question that estate planning can seem daunting. Beyond your last will and testament, there are a bevy of other documents that may seem unnecessary, duplicative, or just plain overwhelming. You may think making beneficiary designations, or forms that allow you to transfer assets directly to individuals without dealing with your will and the probate process, simplifies the entire endeavor. Unfortunately, there are a number of pitfalls that can happen when individuals simply settle for beneficiary designations without utilizing other estate planning tools with an experienced attorney.

1.) Your Beneficiary May Pass Away

Although this may seem obvious, many people do not consider that their beneficiary may pass away. With multiple assets, you may forget to change your designation in the event of your beneficiary’s death, leaving your asset stranded. You may be incapacitated in some way, which could render you unable to update your designations. Without proper mechanisms in place, you would be left without an avenue for passing on your assets.

2.) Your Beneficiary May Not Follow Your Wishes

You may name a beneficiary with the idea that they equitably share the asset or account you’ve left to them with other individuals, such as among siblings or children. Unfortunately, this may not always be the case. Proper planning can ensure your wishes are carried out exactly as you specify, without leaving it up to chance.

Common Mistakes Made in Texas Estate Plans

Published on: January 3, 2022 | By McCulloch & Miller, PLLC

Putting together an estate plan is often a long but well-thought-out process. However, last-minute mistakes can lead to future complications. These last-minute mistakes may be changing a designation in the plan at the last second, taking advice from someone and not consulting with their attorney, or not paying attention to changes to applicable laws. Individuals assume their estate plan is setting them up for the future, but if mistakes are made, then the estate plan may not work as intended. Below are two of the most common estate planning mistakes seen by attorneys, along with steps on how to avoid them.

Not Leaving Enough Assets to Fund a Trust

Many people create a trust as part of their estate plan. A trust allows a third party, a trustee, to distribute funds to a named beneficiary. The creator of the trust will provide specific instructions on how funds—or gifts—are to be disbursed to the beneficiary. But when creating a trust, certain individuals forget to make sure there are enough assets in the trust to pay for what has been intended to be given. Estate planning attorneys recommend putting additional funds in the trust in case assets decrease in value over time. Then, the beneficiaries will still be able to receive the amount intended.

What are the Main Estate Planning Blunders to Avoid?

Published on: April 9, 2020 | By McCulloch & Miller, PLLC

Man thinking on computer
“Maintaining a valid and current estate plan is vitally necessary in order to ensure the efficient and orderly dispersion of assets after a person dies. However, even a small mistake can create huge problems during the settlement process, and in many cases, these errors are impossible for anyone to correct.”

There are a few important mistakes that can make an estate plan defective—most of these can be easily avoided by reviewing your estate plan periodically and keeping it up to date.

Investopedia’s article from a few years ago entitled “5 Ways to Mess Up Estate Planning” lists these common blunders:

What Should I Know about Beneficiary Designations?

Published on: February 28, 2020 | By McCulloch & Miller, PLLC

Many people have tens of thousands–even hundreds of thousands–of dollars in their IRAs. If you have an asset that large, shouldn’t you devote more effort to planning for its ultimate disposition?

A designated beneficiary is named on a life insurance policy or some type of investment account as the individual(s) who will receive those assets, in the event of the account holder’s death. The beneficiary designation doesn’t replace a signed will but takes precedence over any instructions about these accounts in a will. If the decedent doesn’t have a will, the beneficiary may see a long delay in the probate court.

If you’ve done your estate planning, most likely you’ve spent a fair amount of time on the creation of your will. You’ve discussed the terms with an established estate planning attorney and reviewed the document before signing it.

Some BIG Estate Planning Actions for 2020

Published on: February 7, 2020 | By McCulloch & Miller, PLLC

This time of the year is a great time to revisit your estate plan, so you can ensure your legacy is protected for years to come.”

Many of us set New Year’s resolutions to improve our quality of life. While it’s often a goal to exercise more or eat more healthily, you can also resolve to improve your financial well-being. It’s a great time to review your estate plan to make sure your legacy is protected.

The Tennessean’s recent article entitled “Five estate-planning steps to take in the new year” gives us some common updates for your estate planning.

Why are IRA Beneficiary Designations So Important?

Published on: January 22, 2020 | By McCulloch & Miller, PLLC

If you pass away without naming beneficiaries in your will, it can create legal entanglements for your heirs.

If you decide to purchase a life insurance policy or to put some money into a new deferred annuity contract or Individual Retirement Account (IRA), you need to complete the beneficiary form.

However, Investopedia’s recent article entitled “Why Your Will Should Name Designated Beneficiaries” says that you may just name a person as a beneficiary, without fully appreciating this aspect of your estate planning.

Helping Parents Be Sure Their Families are Protected

Published on: September 30, 2019 | By McCulloch & Miller, PLLC

Yes, it is old-school, but if your family is on the traditional side, headed up by a breadwinner dad who runs the finances, then you need to make plans to ensure that your family will be okay, if something should happen to you.

This advice also applies to mothers who are the main breadwinners and run their family’s finances, even though the title of this Forbes article is “How Fathers Can Make Sure Their Families Are Financially Protected.”

Do you have enough life insurance? Be sure you’re adequately insured, so your family won’t struggle to pay the bills without your income. Many employees only have enough life insurance from work to cover a year’s worth of salary, which may be enough for some families. However, if your spouse can't make the mortgage payment on their own, and if they would be unwilling or unable to sell the home, you might want to at least make sure you have enough life insurance to pay off the mortgage. Once you know how much you need, buy a low-cost term policy for the maximum length of time you might need the coverage.