The disposition of retirement assets such as individual retirement accounts (“IRA”) and employer-sponsored retirement plans as well as death benefits from life insurance policies and annuity contracts are not covered by your will or trust as long as beneficiary designations are in place for those assets.  These vehicles are a great way to transfer assets at death and avoid probate, but it is critical that beneficiary designations are in place for them.  If they are not, unintended distributions may occur at death.  For example, if you fail to designate a beneficiary of your IRA, the proceeds from the IRA at your death will pass to your estate and will not avoid the probate process.  Your beneficiaries also stand to lose some tax advantages that they would of otherwise received had the assets been paid directly to them.  Additionally, by avoiding probate, you will reduce certain estate administration costs associated with the probate process and afford your estate a measure of privacy that is not otherwise available in the probate process.

We are sure everyone has a horror story or two related to the probate process.  The probate court does not always work in a manner that the deceased would have wanted.  Probate avoidance can occur if beneficiaries are properly designated for retirement assets, life insurance polices and annuity contracts.  In addition to death, it is important to rethink beneficiary designations if you have gone through a divorce, had children for the first time, are adding another child to the family or have children reaching the age of majority.  The beginning of the year is usually a good time to review this information as that is when many people review their financial situation.  The key though is that you do it on a regular basis because it is extremely important to stay up-to-date with beneficiary designations.