Beneficiary Designations – benefits and considerations



Nick Hearne

Financial Advisor & Associate Portfolio Manager


Individuals have the option to designate beneficiaries directly on assets such as registered plans, insurance policies and annuities. Electing this option results in the proceeds of an asset to bypass the estate and flow directly into the hands of a beneficiary (or beneficiaries). Naming beneficiaries is an important estate planning tool and some of the key benefits are provided below:

  • Timeliness - Beneficiaries generally receive proceeds earlier
  • Probate - Assets may not be subject to probate tax
  • Privacy - Elected beneficiaries not mentioned in will
  • Contestability - More difficult to contest than a will
  • Creditor Protection - Helps ensure proceeds flow to the intended party rather than creditors

Avoiding probate is a particularly attractive reason to name an individual as the beneficiary of an asset. When presented with a legitimate opportunity to avoid paying tax, one should consider it if it is advantageous to the overall estate plan. There are circumstances, however, where a testator may prefer to pay the probate tax and have the proceeds of an asset become part of his or her estate. A common reason for this is when the proceeds are required to pay the testator’s tax liability at death. In the case of life insurance, the sole purpose of a policy may be to offset an anticipated tax bill.

There are many issues to be considered when making a beneficiary designation:

  • Electing a Minor - A trustee will need to be named and a trust may be a better option
  • Revocable vs Irrevocable - Beneficiaries should only be made irrevocable with good reason and when the consequences are fully understood
  • Successor Annuitant or Successor Holder - Only available for spouses and with certain assets
  • Contingent Beneficiaries - Ensure wishes will be met even if the primary beneficiary predeceases the testator

It is important to speak with your Rogers Group Financial advisor when formulating your estate plan. Careful planning and consideration should be taken to ensure that, at the end of the day, proceeds reach the appropriate hands.







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