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Do Retirement Benefits Need To Go Through Probate?

Posted on 14, Oct, 2013

Although this might seem like a very straightforward question, getting an answer actually depends on a couple of different factors, including the fact that we all tend to gather together so many different types of investments during our lives that it can be difficult to keep track of them all.

Probate itself is the process of settling the estate, and any assets relating to that estate, of a person who has died. If a person has been named as the beneficiary of an estate then, in most cases, probate is bypassed and the assets are passed to the named beneficiary. If you're married then you'll probably be required by law to nominate at least one beneficiary of your estate, so they can benefit from your estate when you pass.

Naming beneficiaries isn't always a simple process, bearing in mind that it involves you trusting another person quite a lot. In terms of the types of beneficiary you can nominate they fall into two categories:

a.       Primary beneficiary:  this is usually your spouse or partner, who will then receive your retirement benefits in your place. Some states will require by law that your husband or wife is your primary beneficiary, but that's not always the case elsewhere in the country.

b.      Contingent beneficiary:  a contingent beneficiary will automatically become your primary beneficiary in the situation where the primary beneficiary passes away. In some cases your children can be nominated as the contingent beneficiaries, which is a safe way to keep your assets out of probate.

Living Trusts - a living trust can also be nominated as the primary beneficiary of your estate, including your retirement benefits, but please do get professional legal and financial advice before attempting to set up a living trust as your beneficiary.

On rare occasions, and for varying reasons, the law may not recognize the beneficiary you've named, which will then result in all eligible assets of the estate becoming subject to probate. This is another reason why seeking professional legal and accounting advice when nominating beneficiaries for any part of your estate is so important.

If you're wondering how you go about nominating a beneficiary for your retirement benefits just check with your provider and you'll find that there's either an online option for naming a beneficiary, or alternatively you can mail in a beneficiary form instead.

Please do bear in mind that probate laws and regulations vary from state to state, so the information we're providing here is to act as information only and doesn't represent legal or financial advice of any kind.

That being said the answer to the original question asked at the very start of the article, and the reason you're here in the first place, is that as long as you correctly nominate a beneficiary and contingent beneficiary for the proceeds of your estate then your retirement benefits do not need to go through probate.

We'd be more than happy to answer any questions you have on probate and your estate, why not call us today to see how we can help you?


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