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Beneficiary Designations

You have the option of naming one or more beneficiaries on many of your assets including bank accounts, insurance policies, retirement plans, and other personal property.

With some assets, such as bank accounts, you can create a Payable on Death (POD) designation. A POD authorizes the transfer of specific assets to another person after you die. One advantage of a POD is that the transfer occurs without going through probate.

Other assets, such as insurance policies and retirement accounts, allow you to name one or more beneficiaries who will receive the remaining assets after you die. Again, the beneficiary listing is valuable because the transfer occurs without going through probate.

Those who wish to make a charitable contribution through their estate plan can use a POD or beneficiary listing as a way to designate a gift for charity. There are three benefits to such designations: (1) you do not have to change your will to make these designations; (2) beneficiary designations can easily be changed if you wish to designate a different charity in the future; and (3) your designated charity will receive the donation quickly without the delays of probate.

Here are some examples:

Example 1: Pete doesn't have a lot of wealth, he doesn't own a home, and no longer owns a car. He has a number of CDs at the bank along with a checking account and savings account. Since Pete has no heirs, he wants to leave his assets to his church. To make things easy, he goes to his bank and creates Payable on Death designations for each account. By doing this, he maintains total control of his assets while alive, and then those assets will transfer smoothly to his church after he dies.

Example 2: Randy and Jean are not rich, but they have accumulated some assets over the years. They want to create an estate plan that provides for their three children, and they also want to give a charitable gift for their area Lutheran high school. One problem, however, is that Randy's job requires him to move frequently. Since they want to give their charitable gift to the school in the area in which they live, they are fearful that they will have to modify their will every time they move. After discussing this concern with their professional advisors, they decide to use their retirement plans as their charitable gift, and split the rest of their estate among their children. Each time they move, Randy and Jean simply change their beneficiary designations on their IRAs so they list the school in their area. This does not cost them any money, and the Change in Beneficiary form is easy to complete.

Example 3: Joe and Betty are living on a fixed income and are very frugal with their money. They have a fairly small estate, but they still hope to leave a nice inheritance for their grandchildren and a gift for KML. Since the death benefits from their life insurance policies are tax free, they name their grandchildren as beneficiaries on those policies. They list KML as the beneficiaries on their IRAs for two reasons: (1) those are taxable benefits, but designating KML as the beneficiary, there will be no tax consequence on that gift; and (2) this decision allows them to make a charitable gift and still leave a nice inheritance for each grandchild.

Beneficiary listings are easy to designate, they provide direct distribution of assets without going through probate, and they are handled without the need to modify your will. As with all estate planning decisions, consult with your financial or estate-planning professional before making any significant decisions regarding beneficiary designations.

 

To discuss a planned gift to KML, contact your KML Estate Plan and Deferred Gift Counselor, 
Paul Snamiska, at 262-677-4051 x1116 or paul.snamiska@kmlhs.org.

The information that is provided on this site is for educational purposes only. Consult your personal tax consultant, attorney, or financial planner for specifics that apply to your personal situation.