fi nancialforum Beneficiaries N
Other Provisions Special provisions might pertain to spouse ben- eficiaries who aren’t citizens. Check with your estate-planning attorney if this applies to you.
A will or trust will not determine the disposition of all of your property when you die, so keep benefi ciary declarations up- to-date. By Capt. Bud Schneeweis, USCG-Ret., CFP
Naming beneficiaries is a powerful es- tate-planning tool because it takes legal precedence over a will or a trust. Familiar assets that commonly use benefi ciary desig- nations to determine who gets the proceeds include arrears of pay (AOP), insurance policies, and qualifi ed retirement plans. AOP is the prorated portion of your
fi nal month’s military retired pay. An at- tempt will be made to pay AOP to your designated benefi ciary. To designate a benefi ciary, complete DD Form 2894 and mail it to the Defense Finance and Ac- counting Service (DFAS). If your retired pay doesn’t come from DFAS, check your center’s requirements. After your AOP benefi ciary is up-to-date,
examine the benefi ciary designations for your life insurance and qualifi ed retirement plans. Changing insurance policy benefi cia- ries is usually a simple process, but people often forget to do it. It is important to check the wording of benefi ciary designations after signifi cant life events such as divorce, remarriage, or adoption of children. Word- ing should be explicit. If the benefi ciary designation says “spouse,” proceeds could be paid to a former spouse. Name the spouse who should receive the proceeds. Life insurance proceeds payable to named benefi ciaries pass outside of pro- bate. However, if you declare your estate as your life insurance benefi ciary, your heirs will face the expense and delay of probate, and the proceeds potentially are subject to the claims of creditors.
Qualifi ed retirement plans, typically
401(k) plans and equivalent plans, make up the majority of retirement plans for workers today. These plans can be sig- nifi cant retirement assets after years of tax-deferred contributions. Benefi ciary designations are very important, because a designated benefi ciary also receives spe- cial treatment under the tax code. The designated benefi ciary of a quali-
fi ed retirement plan must be an individual or defi nable group of individuals or a trust with an individual or group of individuals named as benefi ciary. A designated benefi - ciary cannot be a company or an institution, such as a charitable organization, for which a life expectancy cannot be determined. In- dividuals still can leave their plan assets to a charity as a non-designated benefi ciary. Contingent benefi ciaries generally are a good idea for insurance policies and quali- fi ed retirement plans. Having contingent benefi ciaries can preserve the value of as- sets longer within an extended family and provide some maneuvering room for heirs to create tax advantages for themselves. Benefi ciary designations can be complex and contain hidden traps. When planning your benefi ciary designations, seek advice from an estate-planning attorney.
MO
— Capt. Bud Schneeweis, USGC-Ret., CFP®, Certifi ed Senior Advisor®, is director, Benefi ts In- formation and Financial Education. To speak with a fi nancial planner, contact USAA at (877) 913-6622 or
www.usaa.com/moaa, or visit www
.moaa.org/fi nancialcenter for other resources.
*online: Visit
www.dtic.mil and type “DD-2894” in the search bar to download the AOP beneficiary form. 48 MILITARY OFFICER SEPTEMBER 2011
PHOTO: SEAN SHANAHAN
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