How A Retirement Plan, Life Insurance, Or IRA May Be Subject To Probate

In this article, you will learn:

  • How to plan retirement accounts, life insurance policies, and IRAs to maximize benefits
  • Risks of involving children in various documents in end-of-life planning
  • Alternative options to doing so

If a retirement account, life insurance policy, or IRA is prepared correctly, they are not subject to probate. If you name an individual or several individuals as the beneficiary of your retirement or life insurance, that money goes directly to that person without going through probate. If you name your probate estate as the beneficiary, then that money would come into the estate and be handled through probate.

How The Terms Of A Will Can Dictate How Retirement, Life Insurance, And IRAs Are Distributed At Death

If you name your probate estate as the beneficiary of your life insurance or your retirement plan, the terms of a will can dictate them. However, this is not a good idea. You should name an individual or a trust as the beneficiary of your IRAs, retirement plans, and life insurance.

Why Adding Children To Your Bank Accounts To Make Handling Affairs During Your Lifetime Or After Death Easier May Not Be Wise

I do not recommend naming your children as joint owners of a bank account or of a savings account. You can give them signature authority if you want to do that so that they can sign checks for you, but if you make them a co-owner of the account, then for instance, if they cause a bad accident and are sued, your bank account is subject to their creditor because their name is on the account.

An Alternative Plan Instead Of Adding Children To Your Bank Accounts

There are two ways to make it easy to accomplish the goal without naming your children in a bank account. The best way to do so is a durable power of attorney, and making your child the agent for you so that if you are incapacitated, he or she can sign documents, not only checks, but other documents on your behalf. The other way is to give them signature authority on your accounts. In other words, give them the authority though a signature card to let them sign checks for you, but they do not own the account.

Why Not To Add Children To The Deed Of The Home

I highly recommend that you do not add children to the deed of the home. The biggest problem with that is that if the child has created a debt, they are the co-owner of the house, and the creditors can get to your home to pay their debt which could possibly make you homeless. A much better way to do that is to retain a life estate for yourself in the home with a remainder interest to your child so that at your death, it immediately becomes their property.

Why Not To Name Minor Children As Beneficiaries Of Life Insurance, And An Alternative Plan That May Be Better

I recommend against naming a minor child as a beneficiary of a life insurance policy. If you do that, you should have a guardianship in place for that child so you have established who would be the guardian over that child in the event of your death, so that the person would handle the proceeds of the life insurance. A better way is to create a trust and make your trust the beneficiary of the life insurance. Then, in your trust, you will say how those proceeds will be handled.

For more information on Probate Of IRAs, Life Insurance Or 401(k) In SC, an initial consultation is your next best step. Get the information and legal answers you are seeking by calling (864) 271-7940 today.

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