A key piece to the estate planning process is choosing the beneficiaries of your estate and assets listed in your will.
Choosing who will receive your wealth when you die may seem like an easy decision; however, these are decisions that still require a lot of attention and caution.
When choosing who will inherit your estate, you should be aware of your options given the different types of beneficiaries there are.
To begin, you should know that there are three major types of beneficiaries.
Primary Virginia Beneficiary
Primary beneficiaries are the people you state in your will to have rights to specific properties in your estate when you pass away.
You must clearly identify each gift with specific names of who you would like to claim them.
Further, these people are your first choice to receive the property specified in your estate.
In the majority of cases, these beneficiaries will most likely be members of your immediate family, such as your spouse, kids and grandchildren.
When choosing primary beneficiaries, you should be able to trust these individuals with your property.
In addition to naming each beneficiary, you should also consider giving instructions based on hypothetical situations in which alternate beneficiaries would claim property as well.
Making Minor Children Primary Beneficiaries
Unlike adults, children that are minors have limits on what they can claim in their parent’s estate.
Minors can only own property in their name so long as the property’s worth ranges from $2,500 to $5,000.
If the property exceeds that number, the executor or administrator of the will, which must be an adult, must own and monitor it.
Selecting a property supervisor–typically the executor of your will–is extremely important.
Make sure this person can handle money well and will manage the property as you would.
Many times, whomever you choose to be your child’s guardian may also be the child’s property manager as well.
If you choose your spouse as a property manager, it’s also smart to name a backup one as well in case your spouse passes away.
It’s important to note that there are different ways for your child’s property to be managed. They are listed below.
- A Child Trust
- Custodianship (Gifts Released at Age 18 Under Uniform Transfers to Minors Act)
- Family Pot Trust
If you would like to instead leave money for your children’s future college endeavors, you can enlist the help of a 529 Plan.
A 529 Plan is an investment used to put away money for your children’s college career.
When doing so, you can either opt for a savings or pre-paid plan; both of which can used by your child when it comes time for college.
Alternate Virginia Beneficiary
Alternate beneficiaries are those that you name to claim pieces of your estate in case primary ones aren’t able to claim them.
This may be due to either death or incapacity.
For example, let’s assume you leave your house and car to your spouse when you pass away.
If your spouse passes away before you, you can pick your children as alternate beneficiaries so that they can claim this property from your estate.
Life Estate Virginia Beneficiary
Life estate beneficiaries are unique.
Unlike primary and alternate, life estate beneficiaries never have complete control over anything you leave to them.
Instead, they will have rights to the property left to them until their death.
Because life estate beneficiaries never receive ownership, they cannot pass that property to anyone.
With that said, you should also name final beneficiaries to take ownership of the property after the death of the life estate beneficiary.
Residuary Virginia Beneficiary
Naming Residuary Beneficiaries is extremely important for various reasons.
If someone named passes away or you simply didn’t name someone for a specific piece of property, a Residuary Beneficiary receives it instead.
Generally, a will may make a number of specific bequests to primary and alternate beneficiaries.
Everything not expressly included in those specific gifts is know as the residuary, or your residuary estate.
It’s common to make specific gifts in a will, and then make arrangements for the residuary of the estate.
The residuary of the estate can go to one beneficiary, or it can be divided among a number of residuary beneficiaries.
One question you may be wondering about is, “Am I allowed to transfer my estate to my pets?”
As much as you may look at your pet as a part of your family, they’re still legally considered property.
Because of this, you cannot leave property or money in their name.
The best way to make sure your pet receives proper care is to create a Pet Trust.
With a Virginia Pet Trust you can arrange to leave money for your pet and make sure the trustee directs that money to pet care expenses.
A Virginia Pet Trust is a much safer and feasible way to ensure your pet’s well being after you pass rather than just leaving it to someone else.
In conclusion, now that you’ve read this this guide, you’ll be able to know the differences between certain kinds of beneficiaries and their responsibilities.
As mentioned above, make sure to seek legal counsel to go over more details of the estate planning process.