Before diving into the best ways to designate beneficiaries to assets, it is important to understand the difference between nonprobate property and probate property.

Nonprobate property are those assets which have beneficiaries to them. If the beneficiaries are living at the time of the decedent's death, then the assets will likely pass to the beneficiaries without the need to go through probate. This is the case even if the decedent had a will.

Probate property, on the other hand, is property that does not have a proper beneficiaries attached to it. Wills control the disposition of probate property, not nonprobate property. So, for instance, if the decedent failed to designate a beneficiary to life insurance, the life insurance death benefits would be considered probate property and the will would control the disposition of the policy.

Wills which have property passing under them, as in the example above, must go through probate. They control the disposition of probate property. Because a primary goal of estate planning is to avoid probate, this guide discusses the ways in which a person may properly designate beneficiaries to their assets. This guide is not all-inclusive and is meant solely to serve as an informational guide to show how assets can avoid probate if titled properly.

Nonprobate Transfers

In general, if a decedent is married, they will name their spouse as primary beneficiary to their assets and their children or other beneficiaries as contingent beneficiaries. Of course, this may differ depending on the type of asset involved. Generally, you can designate beneficiaries to the following assets:

  • Vehicles
  • Bank accounts
  • Life insurance policies
  • Stocks, bonds, and other investments
  • Mortgages
  • Retirement accounts
  • Pension plans
  • Employee benefit plans
  • Trusts
  • Other written contracts, gifts, and conveyances

Real Estate

Depending on your state, you may or may not be allowed to designate beneficiaries to your real estate. Below are the states in which you CAN designation beneficiaries to real estate by virtue of a beneficiary deed or transfer on death ("TOD") deed:

  • Alaska
  • Arizona
  • Arkansas
  • California
  • Colorado
  • District of Columbia
  • Hawaii
  • Illinois
  • Indiana
  • Kansas
  • Maine
  • Minnesota
  • Mississippi
  • Missouri
  • Montana
  • Nebraska
  • Nevada
  • New Mexico
  • North Dakota
  • Ohio
  • Oklahoma
  • Oregon
  • South Dakota
  • Texas
  • Utah
  • Virginia
  • Washington
  • West Virginia
  • Wisconsin
  • Wyoming

You CANNOT designate beneficiaries to real estate pursuant to a beneficiary or TOD deed in the following states:

  • Alabama
  • Connecticut
  • Delaware
  • Florida
  • Georgia
  • Idaho
  • Iowa
  • Kentucky
  • Louisiana
  • Maryland
  • Massachusetts
  • Michigan
  • New Hampshire
  • New Jersey
  • New York
  • North Carolina
  • Pennsylvania
  • Rhode Island
  • South Carolina
  • Tennessee
  • Vermont

Designated Beneficiaries

When designating beneficiaries to many of your assets, you will have to work with financial institutions. This means calling your financial institution to determine which forms you are required to fill out in order to effectively designate a beneficiary. Generally speaking, if the owner of an asset is married, they will want to designate primary and contingent beneficiaries as follows:

  1. Primary Beneficiary: Spouse
  2. Contingent Beneficiary: Children or others

Vehicles

The owner should go to the DMV and fill out a Transfer on Death form so that the vehicle's title will pass to the designated beneficiary.

Bank Accounts

The account owner can designate beneficiaries to their bank accounts by asking the bank to provide them with a Payable on Death form. Once this form is filled, whomever the account owner designate as beneficiary will be able to access the funds after the owner's death. However, there may be other requirements imposed by the bank to access the funds. Each bank is different, so it is important for the account owner to have discussions with bank representatives.

Life Insurance Policies

To designate beneficiaries to a life insurance policy, the owner of the policy will need to talk with the life insurance company or their broker to obtain beneficiary designation forms.

Stocks, Bonds, and Other Investments

If a person owns stocks, bonds, or other investments, they may contact their investment advisor or financial advisor to designate beneficiaries to their accounts holding such investments. However, if they own stock in certificated form, they may need to talk with a transfer agent for the company in which they have stock.

Mortgages

For property subject to a mortgage, the property owner may wish to consult with their lender to establish beneficiaries to the mortgages so that they will assume the mortgage upon the owner's death. Of course, it is advisable to discuss with the beneficiaries their ability to take on the mortgage.

Retirement Accounts & Employee Benefits

The owner of a retirement account (like an IRA or 401(k)) should discuss with their financial advisor or plan administrator how they can designate beneficiaries to these assets. Typically, the advisor or administrator will issue a form for the owner to fill out for the designation of beneficiaries. If the plan is a pension plan, the owner's spouse may be the only beneficiary allowed to receive the pension.

Trusts

By state, trusts avoid probate. If assets are properly transferred into a trust during the life of the settlor, then the assets will avoid probate. A person wishing to establish a trust may do so through GoGo Estate.

Conclusion

It is important to designate proper beneficiaries to assets. Although this list is not exhaustive, GoGo Estate customers should contact their financial representatives and other institutions to inquire about how to designate proper beneficiaries. This will avoid a lot of confusion and hassle after death.