Throughout your lifetime, you accumulate financial assets that will need to be distributed upon your death. Taking time now to plan for this asset transfer will help you ensure your legacy is secure while providing peace of mind for yourself and your loved ones for their future financial security. Different types of financial accounts offer ways to plan for asset transfer. 

Beneficiary Designations  

By naming beneficiaries on your accounts, you can dictate exactly where your assets will go and bypass the often lengthy and costly probate process.  

• What to Expect: Typically, your beneficiaries will need to provide a death certificate and proof of identity to the financial institution to claim the assets. It's a relatively straightforward process designed to streamline the transfer of wealth. 
• Common Pitfalls: Marriages, divorces, new births, and even estrangements can significantly impact your wishes. It's important to review and update your beneficiary designations regularly to reflect these changes. Don't let outdated designations derail your intentions. 

Transfer on Death (TOD) or Payable on Death (POD)  

While beneficiary designations are common for retirement accounts, TOD or POD designations offer similar benefits for non-retirement assets such as checking and savings accounts, brokerage accounts, and even certificates of deposit (CDs). 

• What They Do: These designations provide a clear path for transferring ownership of these accounts upon your death. 
• What to Expect: Like beneficiary designations, your named beneficiaries will generally need to present a death certificate and identification to claim the assets. 

Joint Accounts 

Having a joint owner on your accounts allows for immediate access to the funds and avoids probate. However, this convenience comes with potential downsides. 

• Pros: Easy setup, avoids probate, and can be helpful for managing finances during your lifetime. 
• Cons: Creditors of either account holder can access the funds. Additionally, joint ownership can lead to disputes or unintended consequences, especially if the relationship between the account owners changes. 

Retirement Accounts 

Retirement accounts such as IRAs, 401(k)s, and 403(b)s come with their own set of rules regarding beneficiary designations. 

• Beneficiary Designations: Many, if not most, institutions require naming a beneficiary when you open an account. This will be the primary method of determining what happens to the assets after your death. Failing to name a beneficiary on your retirement accounts can lead to significant delays and complications, as these assets may be subject to probate. 
• Spousal Beneficiaries: Spouses generally have greater flexibility with inherited retirement accounts, including the option to roll them over into their own accounts. 
• Non-Spousal Beneficiaries: Beneficiaries such as children or other loved ones typically face stricter distribution rules and may need to withdraw the funds within a specific timeframe to avoid tax penalties. 

529 Plans 

If you want to save for educational expenses, 529 plans are a valuable way to do it. 

• Beneficiary Designations: Keeping the beneficiary designation updated is vital. As children grow, their educational goals may change, or you may wish to redirect the funds to another family member. 
• Flexibility: If the original beneficiary doesn't need the funds, you can usually change the beneficiary to another qualifying family member, ensuring the money is used for its intended purpose. 

Living Trusts: A Comprehensive Approach 

A living trust can be a powerful tool for managing a wide range of assets, including financial accounts, real estate, and businesses. It offers greater control over how your assets are distributed and can help minimize estate taxes and avoid probate. 

The Importance of Professional Guidance 

Navigating the complexities of asset transfer can be challenging. Be sure to consult with a qualified financial advisor or estate planning attorney to get personalized guidance that will help ensure your wishes are carried out effectively. Estate experts can help you: 

• Develop a comprehensive estate plan. 
• Choose the right tools for your specific needs. 
• Navigate tax implications. 
• Ensure your assets are protected and distributed according to your wishes. 

Other Considerations 

Your legacy extends to digital accounts. Find out about Managing Online Accounts After Death and What Happens to Your Email Account When You Pass Away. 

For more guidance on how to handle your legacy with your loved ones, download our military Survivor Pre-Planning Checklist or call AAFMAA Member Benefits at 800-522-5221, option 2, then option 2 again, or email [email protected].