The following article written by a New Jersey Lawyer about New Jersey law and Beneficiary forms in your Last Will and Testament is featured on New-Jersey-Lawyers.com

Beneficiary Forms

By Michael B. Mangini, Attorney at Law

 Forgetting Your Beneficiary Forms May

The failure to correctly complete the forms that designate the beneficiaries of your life insurance policies and retirement plan accounts may undermine your entire estate plan. Here are a few tips on doing it right.

Never name your estate as the beneficiary or permit your estate to become the beneficiary by default. Permitting your estate to be the beneficiary deprives the ultimate beneficiary of significant income-tax benefits and strips the assets of their protection against the claims of creditors.

Never name a friend or family member as beneficiary and make her promise to use the money for your child. Three big problems immediately come to mind. First, the friend has no legal obligation to use the money for your child. Second, if your friend gets a judgment against her, her creditors may take the money. Third, if your friend dies or gets divorced, her husband, not your child, may get the money.

Never name a minor child as beneficiary. Most couples name their minor child as contingent beneficiary; this is not a good idea. First, someone will have to ask the court to appoint and qualify him as guardian of the minor’s property. Second, the child will get full control over the money on his eighteenth birthday.

Never name an irresponsible adult as beneficiary. The beneficiary will waste the funds in no time. Never name a disabled adult as beneficiary; receiving the money may result in a loss of public benefits such as SSI and Medicaid.

How do you manage these issues? If all beneficiaries are responsible adults under no disability you may name them as the designated beneficiaries, but naming an asset-protection trust as beneficiary is a better idea.

If a beneficiary is under age 18, disabled or irresponsible consider creating a trust in your Last Will and Testament. You may name the trustee who is legally responsible for managing and spending the funds in the trust for the benefit of the beneficiaries. The trust funds will be protected from the claims of the trustee’s and beneficiaries’ creditors. You may control the purposes for which and the age or ages at which the funds are distributed to your beneficiary. A well-drafted trust will preserve the beneficiary’s eligibility for public assistance. Designating a trust created in your Last Will as beneficiary is not the same as naming your estate as beneficiary; therefore the asset-protection and income-tax benefits are preserved.

If you are married with children, ordinarily you should name your spouse as primary beneficiary and your testamentary trust as contingent beneficiary.

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