Many people do not realize they should have chosen a beneficiary until it is too late to do so. You do not want to end up in that position, as it can lead to complicated situations. Some assets like retirement plans, IRAs, annuities and life insurance plans require you to choose a beneficiary. A beneficiary election is a document that is legally binding, and holds exceptionally strong power in the courts. Making it a part of your estate planning is a wise decision.

When you do not hold a beneficiary election, which is more common than one might think, the assets will automatically become a part of your estate. This may lead to unwanted problems, such as having to pay more taxes on this estate. For example, and inherited IRA is eligible to skip the immediate income taxation, and you may be able to get the taxes deferred for several years.

Probate can become another problem when there is no elected beneficiary. If you have not designated a beneficiary, your assets must go through the probate process in the courts. This process can be timely, depending on the size of the estate, and whether or not there is a will. If there is no will, it will be up to the probate court to divide your assets.

If the person you wish to choose as your beneficiary is a minor child or someone who may need assistance in handling the assets, there are quite a few options. One of the ways would be to establish a trust. It is important to work with an experienced estate planning professional if you have questions regarding the best way to structure your future estate.

Source: The Patriot Ledger "MAKING CENTS: Don't forget to review your beneficiaries" July 19, 2011