Vantage Point Legal Services LLC

Beneficiary Designations

Also available to you is the use of a broad category of beneficiary designations that operate very much like the beneficiary designation you would find on a life insurance policy. Missouri statutes now provide for the use of beneficiary designations to effectuate the transfer of certain types of property at the time of death without having to go through probate and without the disadvantages of joint tenancies. Beneficiary designations cause property to avoid probate because their contractual nature serves to transfer and convey ownership of the asset or its proceeds to the named beneficiary immediately upon the death of the owner or owners without the necessity of going through probate.

WHAT KIND OF ASSETS CAN HAVE BENEFICIARY DESIGNATIONS?

These beneficiary designations include Payable On Death (“POD”) and Transfer On Death (“TOD”) Beneficiary Designations for personal property, and Beneficiary Deeds for real property. The persons who are to receive the property on the death of the original owner may be designated as beneficiaries for a wide range of assets, such as (a) life insurance policy proceeds, (b) IRAs, 401 (k) plans and other employee benefits, (c) bank accounts, CDs and other cash-like assets held at financial institutions [these are known as "Payable on Death" ("POD") Beneficiary Designations], (d) automobiles, motor vehicles, boats, trailers and other instruments of title, stocks, bonds and other securities, and securities accounts [these are known as "Transfer on Death" ("TOD") Beneficiary Designations], and (e) real estate such as your residence or any commercial or recreational real property [these are known as "Beneficiary Deeds," which are recorded in the Recorder of Deeds Office of the county in which the real estate is situated].

HOW DO BENEFICIARY DESIGNATIONS WORK?

POD and TOD beneficiary designations and beneficiary deeds are very popular because (a) they are fully revocable by the owner, (b) the account, asset proceeds or property passes directly to your named beneficiary without going through probate, (c) the consent of the beneficiary is not required in order to mortgage or sell the property, and (d) since no taxable “present interest” is transferred upon setting up the beneficiary designation, no gift tax liability is incurred at that time. The POD or TOD arrangement is preferable to joint tenancy in these respects.

ARE BENEFICIARY DESIGNATIONS AN ADEQUATE SUBSTITUTE FOR A WILL OR TRUST?

In spite of the many benefits they provide, when used alone and without proper advice, beneficiary designations are subject to many of the same disadvantages as jointly owned property. They are not intended to be an adequate substitute for a will or trust, because succession among intended beneficiaries usually cannot be adequately described or anticipated in a simple beneficiary designation. In fact, the best use of beneficiary designations is in close association with a revocable trust. They can be very useful in tying assets to a revocable trust, so that the assets pass directly into the revocable trust without first going through probate.

WHO CAN BEST ADVISE YOU ABOUT BENEFICIARY DESIGNATIONS?

You should not open any POD accounts or execute any TOD transfer on death instructions or beneficiary deeds without first consulting with an attorney who practices in the area of estate planning. He or she will be able to advise if a POD, TOD or Beneficiary Deed is right for you.