Choosing Beneficiaries and Fiduciaries

Do you need help choosing beneficiaries and fiduciaries? Kevin C. Martin, Attorney at Law, PLLC, offers legal guidance to secure your assets. Contact us today.


What to Consider When Choosing Beneficiaries and Fiduciaries?

In estate planning, beneficiaries and fiduciaries are pivotal to achieving your goals. Selecting the right beneficiaries and fiduciaries depends on your unique situation and family relationships, so there’s no one-size-fits-all.

Making informed decisions about these critical roles ensures that your estate is managed according to your desires and that your loved ones are provided for. An estate planning attorney from Kevin C. Martin, Attorney at Law, PLLC, can guide you through the process of choosing beneficiaries and fiduciaries.

Why Is Beneficiary Designation Important?

Designating beneficiaries is a critical step in financial and estate planning. Every estate planning document requires naming beneficiaries. Whether it’s a will, trust, or another instrument, you must designate the beneficiaries you want to inherit your assets. Otherwise, the probate court will choose for you.

Moreover, certain financial instruments, such as life insurance policies, pension plans, and retirement accounts, also mandate beneficiary designations. Naming beneficiaries allows for the seamless transfer of your death benefit and assets directly to your loved ones upon your passing.

By designating beneficiaries, you not only can sidestep the time-consuming and costly probate process but also ensure a more efficient and conflict-free distribution of assets.

Who Can Be Named a Beneficiary?

Beneficiaries are the people who receive assets from your estate after your passing. In Washington, DC, there are no specific legal restrictions on who can be a beneficiary of your estate or financial assets. A family member, friend, charity, or any specific person or entity can serve as your beneficiary.

Types of Beneficiaries

In some estate planning instruments, you may need to name two types of beneficiaries – primary and contingent beneficiaries. Such instruments may include a life insurance policy, retirement accounts, and Payable-on-Death (POD) and Transfer-on-Death (TOD) accounts.

Primary Beneficiary: This is the person or entity who is the first in line to receive your assets when you pass away. They have the primary claim to the assets, and distributions are made to them before contingent beneficiaries. You can name multiple primary beneficiaries, but it’s important to specify how the assets should be distributed.

Contingent Beneficiary: Also known as a secondary beneficiary, you can think of contingent beneficiaries as the backup plan. If the primary beneficiary is unable to receive the assets, the contingent beneficiary steps in. They inherit the assets if the primary beneficiary is deceased, cannot be located, or chooses not to accept the assets.

What You Should Consider Before Choosing Beneficiaries

Selecting a beneficiary is a very personal choice. However, bear the following in mind when considering beneficiary designations:

  1. A beneficiary of an insurance policy requires the beneficiary to have an insurable interest. There must be a real financial connection between the parties. For example, in life insurance, an insurable interest exists when the beneficiary would suffer a financial loss or hardship in the event of the insured person’s death. This is typically the case for family members, dependents, or business partners who rely on the insured for financial support.
  2. If a beneficiary does not have the skills to manage their finances, you can create a trust. You can then appoint a trustee to manage investments and distributions on your beneficiary’s behalf.
  3. Most pension programs, insurance companies, and retirement funds do not provide benefits to a minor child. If you have minor beneficiaries, consider establishing a trust for them and choose a trustee to handle the account until the child reaches the age you see fit.
  4. Consider the laws governing beneficiaries of life insurance policies and other assets. Certain providers can limit who you can designate as your beneficiary.

It is a good idea to consult an experienced, reputable estate planning lawyer for legal advice.

What Are the Responsibilities of a Fiduciary?

A fiduciary is a person or organization with a legal obligation to act in the beneficiaries’ best interests. The fiduciary is required to keep the interests of the beneficiaries above his own and minimize or avoid conflicts of interest.

Here are a few more of the responsibilities of fiduciaries, such as the executor of estate:

  1. Prudently manage assets
  2. Maintain accurate records
  3. Provide regular reports to beneficiaries
  4. Invest assets wisely
  5. Comply with legal requirements
  6. Distribute assets according to terms
  7. Uphold the duty of loyalty and care

Fiduciary duties can be challenging and time-consuming. However, the fiduciary can hire professional skills to assist. They can use money from the estate to procure professional services or hire an estate administration attorney when needed.

Who Can Be Named a Fiduciary

Fiduciaries are the persons or institutions you entrust with managing and distributing your assets and executing your wishes, such as an executor or trustee.

Trustees hold legal title to the property for the benefit of designated beneficiaries, whereas executors settle a testator’s inheritance under the terms of their will.

How to Choose a Fiduciary?

Fiduciaries should be:

  • Sincere and dependable

  • Responsible and ready to handle work with demanding deadlines

  • Fair in managing conflicts to prevent damaging litigation

  • Prudent while handling assets and

  • Good with money matters

Fiduciaries should not cause disputes among beneficiaries, and this may only be achievable when they are not beneficiaries themselves or have any interest in the estate.

Can a Beneficiary Also Be a Fiduciary?

Yes, a beneficiary is often also appointed in a fiduciary position. So, a beneficiary and fiduciary can be the same person.

However, conflicts may arise with other beneficiaries if a beneficiary is also an executor and a trustee. Resentments and potentially damaging litigation can be the result.

Appointing an impartial fiduciary to serve alongside the surviving spouse may be preferable. Even though appointing a separate fiduciary can be expensive, it may help preserve family ties and prevent conflict.

What Happens if a Beneficiary or Fiduciary Predeceases Me?

If a beneficiary or fiduciary predeceases you, your estate planning documents should have contingencies in place. During the estate planning process, it’s important to consider alternate beneficiaries and fiduciaries to manage your assets, such as financial accounts or life insurance proceeds, if the primary ones are unavailable.

For instance, if minor or dependent children are involved, a secondary guardian or trustee can ensure their legitimate financial interest is protected. Similarly, if the insured person on a life insurance policy or the agent in a health care directive passes away, having alternates listed in your estate plans safeguards against disruptions.

This approach helps maintain stability, particularly if government assistance or specific care is needed for minors or dependents.

Kevin C. Martin, Attorney at Law, PLLC Can Help

A good estate plan ensures there are no ambiguities regarding who, what, and how your estate should be distributed. Our DC trusts lawyer at Kevin C. Martin, Attorneys at Law, PLLC, can help you establish a comprehensive estate plan and identify the proper beneficiaries and fiduciaries.

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Let us help you secure your loved ones’ future today. Contact us to schedule a free consultation!