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Beneficiary Designations in Estate Planning Under Ohio Law

by | Jun 10, 2024 | Estate Planning

Beneficiary designations play a critical role in estate planning, allowing you to direct certain assets to specified individuals or entities upon your death outside of a will.  This blog post will examine how beneficiary designations operate in Ohio and why the proper designation is vital for carrying out your estate planning wishes.

What Are Beneficiary Designations? 

Beneficiary designations are provisions that allow account owners to name a beneficiary to receive assets directly upon the owner’s death, overriding any instructions in a will or trust.  Common accounts with beneficiary designations include life insurance policies, retirement accounts like 401(k)s and IRAs, POD/TOD bank accounts, stocks and bonds, and annuities.

How Do Beneficiary Designations Work in Ohio?

Ohio recognizes the validity of properly completed beneficiary designations.  Ohio Revised Code §2131.10 states that the designation of a beneficiary on a life insurance policy or annuity contract will override any conflicting provision in a will or trust.  Similarly, retirement accounts with a named beneficiary will pass outside of probate directly to the designated individual or entity.

Why Are Beneficiary Designations Important? 

The beneficiary you name on your accounts will receive those assets when you pass away, regardless of what your will may state.  Beneficiary designations allow you to avoid the time and expense of probate for certain properties.  Designations also provide you control over who inherits your assets.  Without a proper designation, your assets may go to unintended heirs or become part of your probate estate.

Tips for Effective Use of Beneficiary Designations

  • Review current designations periodically and update as needed after major life events like marriage, divorce, birth of a child, or death of a beneficiary, as outdated designations can lead to litigation between competing heirs.
  • Consider tax implications when naming beneficiaries. Spouses may qualify for an unlimited marital deduction.
  • Designate contingent beneficiaries in case your primary beneficiary predeceases you.
  • Keep thorough records of your various beneficiary designations.
  • Seek guidance from an estate planning attorney to coordinate your overall plan.
  • Understand spousal rights and elective share laws, which may provide protections for a surviving spouse.
  • Consider special needs trusts for beneficiaries with disabilities.

Beneficiary designations can be a powerful estate planning tool if used properly.  Be sure to periodically review your beneficiary choices and work with experienced counsel to thoughtfully coordinate your designations with the rest of your plan.  Keeping designations up-to-date and documented is key to ensuring the transfer of your assets according to your wishes under Ohio law.

If you have questions about Beneficiary Designations contact John Tullio at 216-621-7860.

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