There are three methods people can transfer their property to beneficiaries when they pass away. The three methods are: contractual arrangements, written wills or Montana intestate succession statutes (laws for those who did not have a written will). For this article, we will look at contractual arrangements.
Contractual arrangements specifically provide for the passing of property or assets to a beneficiary and are considered transfers taking effect at death. Some examples of assets which provide the naming of beneficiaries through contractual arrangements are: life insurance and annuity policies; payable on death (POD) designations for checking and savings accounts, certificates of deposit, US savings bonds; transfer on death (TOD) designations for stock, bond and mutual fund accounts; individual retirement accounts (IRAs) and beneficiary deeds for real property in Montana. Designating beneficiaries is usually done when one of these is opened or initiated.
What is the advantage of designating beneficiaries through contractual arrangements? Probate, which is the legal procedure generally used to settle a deceased person’s estate, is not required for assets controlled by contractual arrangements. Keep in mind, however, assets passed to beneficiaries through contractual arrangements are still subject to federal estate taxes as well as creditors’ claims against the decedent’s estate. Assets valued at less than $11.58 million will have no federal estate tax on a decedent’s assets in 2020 and less than $11.7 million in 2021.
Do you remember who you designated as your beneficiaries? Be sure your beneficiaries through contractual arrangements are up to date especially if you have gotten married, divorced, had family members pass away, beneficiary name changes, etc. This is important because contractual arrangements take precedence over a person’s will. To change beneficiary designation, you will need to request it through each financial entity. They typically have beneficiary designation change forms which need to be signed, dated and returned to the financial entity in order for the change to be effective. Most forms will indicate the change revokes any beneficiary designations made under previous contracts but you will want to check to be sure.
Joint tenancy with right of survivorship on real and personal property also does not go through a court administered probate process. If the joint tenant passes, the surviving joint tenant(s) receive all real and personal property they are listed on.
There are many forms of beneficiary designations you have the option of designating. Some of these include: one beneficiary, two beneficiaries equal division, two beneficiaries unequal division, three or more beneficiaries, primary and contingent beneficiaries, charitable beneficiaries, trusts and a few others. In addition, you can choose the wording of your beneficiary designations for most contractual arrangements, usually in the event where tax planning advice has been obtained from a certified public accountant, certified financial planner and/or an attorney.
The above information is a summary of the more in-depth Designating Beneficiaries through Contractual Arrangements MontGuide available at msuextension.org, clicking Publications at the top and searching for 199901HR or entering the following link in your search bar http://msuextension.org/publications/FamilyFinancialManagement/MT199901HR.pdf.
To request a hard copy or learn more, contact Janell at the Chouteau County Extension Office at 622-3036, janellb@montana.edu or in the green building next to the Chouteau County Courthouse at 1308 Franklin St in Fort Benton.
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