Tag Archives: beneficiary designations

Assets left by beneficiary designation are NOT part of the estate passing under your Grandmother’s Will

old-lady-107404_640Dear Liza: My grandmother passed away peacefully at 97 in February.  I am the executor of her will.  She had changed her will, legally, several times depending on who had made her mad at the time.  Instead of changing it again, she made me the sole beneficiary on some cd’s and mutual funds.  In her will, she left $15k or 15%, whichever was less to my half sister.  Do I have to count the funds that were left to me specifically as part of the estate? Your grandmother sounds like she was pretty sassy.  The assets that were left to you directly by beneficiary designation DO NOT count as part of the lesser of 15% or $15K gift your grandmother made to your half sister.

Only the assets that are governed by the Will count for that calculation and are considered to be part of the “estate.”  The assets left to you by beneficiary designation are separate from the assets that will pass to beneficiaries under your grandmother’s Will. If your grandmother’s Will has to go through probate, the assets that pass by beneficiary designation are not part of the probate estate, either.

What’s a Testamentary Trust?

IRA moneyDear Liza:  I’ve read that I could create a trust for my children in a Will, then name that trust as a beneficiary of my retirement account.  That way, as I understand it, my successor Trustee could manage those retirement assets for my children until they grow up. But if I do that, will my estate have to go through probate before that trust can be established? Yes, in order to establish a trust that’s created by a Will, your estate would have to go through probate first.  What you are describing is called a ‘testamentary trust’ because the trust is created by a Will. The order issued by the court at the end of the probate will incorporate the terms of that trust.

To avoid probate altogether, you should use a living trust to create a trust for the benefit of your children, and put your assets in that trust before you die. You can name that trust as a beneficiary of your retirement account, and, after your death, the successor Trustee will work with the plan administrator for that retirement account to transfer the assets into the trust for your children.  That being said, if your children are over eighteen, it’s easier to name them directly as beneficiaries, rather than work through the medium of a trust–which has a slightly different set of rules for how the required minimum distributions are calculated.

Do I Need a Living Trust?

Dear Liza: I am a 61 single retiree who has a single family home, an IRA, life insurance and a small pension. With my siblings as beneficiaries to these instruments. Is a living trust/will needed anyway? So, it’s true that if you have named beneficiaries for your IRA, life insurance and pension, those assets will go to those beneficiaries and your Will or Living Trust would have nothing to say about that part of your estate plan.  But, here’s the thing–in most states you cannot name a beneficiary for a house.  In those states, the only way to leave your house to certain people and avoid having to go through probate to do it, is to set up a living trust and transfer your house to that trust.  Click here for a list of the states that do permit the transfer of a house by naming beneficiaries on a deed–called a transfer-on-death deed. Sadly, California is not one of them.