Beneficiary designations

Did you know?
  • Having a valid will in place isn’t enough.
  • Assets you pass on outside of your will are called non-probate assets. They include lRAs, 401(k)s, pensions, life insurance policies, and certain bank and brokerage accounts.
  • If beneficiaries are properly set for these non-probate assets, ownership can transfer faster than your assets that must go through probate.

What are beneficiaries?

  • ​In the estate planning context, beneficiaries are the people and organizations that receive property when its owner passes away.
  • For non-probate assets, beneficiaries generally must be named using a particular form that is specific to each asset.

​What are the benefits?

  • Receive Immediate Income Tax Savings: When you give a gift of stock, bonds, or mutual funds, you’re eligible for a tax deduction for the full fair market value of the securities on the date you transfer ownership to the Circle for Children, provided you have owned the securities for at least one year. You may use this non-cash deduction for up to 30 percent of your adjusted gross income, and any unused portion of your deduction may be carried forward for up to five years. 
  • Stock Gifts Cost Less: For example, you purchased stock 5 years ago for $1,000. Between the date you purchased the stock and today, that stock has increased in value from $1,000 to $5,000. This increase in value is commonly referred to as a capital gain. If you transfer your stock as a gift to the Circle for Children today, you may be potentially making a $5,000 gift that only costs you $1,000. 
  • Avoid Capital Gains Tax on Appreciated Stock: By transferring ownership of appreciated securities to the Circle for Children outright, you bypass 100 percent of the capital gains tax which would apply if you liquidate the asset yourself. For this reason, it is imperative that transfer of ownership of appreciated securities to the Circle for Children takes place prior to the sale of the asset(s).

why set beneficiaries?

  • The distribution of your non-probate assets is not controlled by your will. To ensure that those assets go to the people and organizations you love, you must be sure to properly name your beneficiaries, and update them over time.
  • ​Most Americans have not properly designated beneficiaries for one or more of their non-probate assets. If neglected, the consequences can be both serious and expensive.

​How it works?

When you pass away, it’s likely that some of what you own will go through probate before being passed on to your loved ones. Probate is the legal process of administering your estate after you die. A court oversees the process to make sure your debts are paid and your property is passed on to the right people. Probate typically takes between six months and two years, and in some states the court and legal fees can be costly.
However, there are some assets that don’t have to go through the probate process to be passed on to your family, friends, or chosen organizations (like your favorite charity). These are known as non-probate assets. Some examples of non-probate assets include:
To prevent non-probate assets from going through probate, you have to choose a beneficiary for each of them using a beneficiary designation form. Then, after you die, ownership of these assets can smoothly transfer to your beneficiaries — avoiding the probate process.