What does beneficiary mean?
What does Beneficiary mean?
A beneficiary is a person or thing that receives help or an advantage from something. At least that is the definition if you look beneficiary up in the dictionary, and it is a true statement. When it comes to estate planning, the word becomes further defined. In estate planning, a beneficiary is a person (or thing) that receives the benefit of money, property or real property from a trust or estate on behalf of a Testator, Benefactor or Settlor. For example, the beneficiary of a life insurance policy is the person who receives the payment from the insurance company after the death of the insured. Or one of the beneficiaries of the estate received the decedent’s automobile.
How do you designate a Beneficiary?
A beneficiary can actually be designated in several places and that can be problematic. Beneficiaries are most commonly designated in a Will or in a Living Trust, but they can also be designated in a life insurance policy, retirement fund, investment account or bank account. The reason this can be problematic is that the information can become outdated and conflicting. For example, a Testator (the person who makes a will) may designate the Beneficiary of his life insurance policy as his second daughter in his will, but he may have previously designated the beneficiary of that policy as his first son when he took out the policy with his insurance company. In this situation it will likely be up to the probate court to determine who the true Beneficiary of the insurance policy is.
Can a Beneficiary be removed from a will or a trust?
Yes, a beneficiary can be removed from a will or trust while the Testator is still alive and while the living trust is still revocable. The term “Last Will and Testament” means the final version of a will if multiple version exist or existed. People will commonly make updates to their will as life events occur and they may choose to add or remove beneficiaries. A living trust is typically a revocable living trust while the person who created it (the Settlor or Trustor) is alive. Revocable means that they are able to make changes to the trust. Often when the creator of the living trust passes, it becomes irrevocable and changes to it can no longer be made. It should be mentioned that each state has their own laws and rules governing the validity of a will, trust or estate. In most situations if it can be proven that a person made changes to their estate planning documents when they were not of sound mind or do to coercion, those changes may not be accepted by a court.
What is an Executor?
What is an Executor?
An Executor is the individual chosen to administer the estate of a person who has passed. The Executor is usually declared by the decedent (the person who passed) in their will. If a person passes without having a will, if the will can not be validated, or the person chosen by the decedent can not act as the executor for any reason, a court will select an Executor / Administrator during the probate process.
What are the responsibilities of an Executor?
The Executor on an estate often has several important responsibilities. During the potentially lengthy probate process, the executor operates as the primary contact person for the estate. The estate Executor is responsible for completing all of the tasks required for probate to be finalized. The following is a list of some of the common duties of an estate Executor:
- The estate Executor is responsible for carrying out the wishes of the decedent
- Locating, collecting and maintaining the assets of the estate
- Obtaining legal or professional assistance for the estate if needed
- Maintaining or creating a bank account for the estate
- Alerting creditor and potential heirs of the passing of the decedent
- The cancelation or payment of expenses related to the decedents estate
- The payment of the decedents taxes with the estate funds
- The distribution of the assets to the beneficiaries once probate has concluded
Does an Executor get paid for their duties?
An Executor can be paid a reasonable fee for the work they do on behalf of the estate. Often times when the Executor is a close friend or relative of the decedent, they will choose not to request compensation for their duties. If the decedent has chosen an attorney or professional estate administrator, the courts will permit non excessive compensation providing the estate can afford the expense.
What is an estate plan?
An estate plan or estate planning is the process by which an individual or family arranges the transfer of assets in advance of death. Typically an estate plan attempts to preserve as much wealth as possible for the beneficiaries included in the estate plan. Some of the benefits of estate planning or having an estate plan include:
- The naming of a guardian for the care of any non adult children or children with special needs
- Specifies instructions for your care and financial affairs if you become incapacitated before death
- The minimization of taxes, court costs, and legal fees related to the distribution of your assets.
Generally, when a person passes without a will or trust, their money and property will be distributed according to state law. Essentially the state will determine who gets the property based on their relationship to the person who passed. Some property, such as insurance policy proceeds, joint bank accounts and retirement accounts will be distributed to the person you designated as the beneficiary of that specific account. In most cases, the company providing the account allows you to specify a beneficiary. In the case that it is a joint account, the other person on the account with you usually gets the balance when you pass.
One way you can control the distribution of your property after death is through a will. But, even though your will can provide for information on how to distribute your assets, your beneficiaries or a named executor will still need to go through a court process called probate to distribute your property. You can also arrange for the distribution of your property through a living trust.