The Basics of Designating a Beneficiary

December 22, 2023

Know your options

Did you know you can designate an individual, a group of individuals such as your children, a charity, a trust, or your estate as a beneficiary? One of the great advantages of passing assets by beneficiary designation is that they pass outside of probate unless the beneficiary is your estate. Thus, your intended beneficiaries have access to the funds within a short time after your death. They will not have to wait months or sometimes years until probate concludes for their inheritance. Typically, you should avoid naming your estate as the beneficiary because of the need for probate. Naming your estate may also have adverse tax consequences and expose the asset to creditors’ claims. Listed below are some of the beginning, basic steps for completing a beneficiary designation:

1. Make sure you complete the beneficiary designation forms. If you don’t complete beneficiary designations, the financial institution or state or federal law will determine who gets the asset on your death. Without a properly completed beneficiary designation form, life insurance proceeds will likely pass to your estate. Similarly, if you are the sole owner of other financial accounts, they will probably be paid to your estate when you die. Your family will have to probate your estate to get these funds. Retirement accounts will likely pass to your spouse if you are married or to your estate if you are not married. Distributions from retirement accounts to your estate will need to be probated and will get unfavorable income tax treatment. Assuming these accounts contained tax-deferred contributions, a lump sum distribution to your estate means the entire amount is taxable. Alternatively, distributions and tax can be spread over five years. Distributions of tax-deferred retirement accounts to individuals are also taxable but can be spread out over much longer periods.

2. Name both a primary beneficiary and a contingent beneficiary. The primary beneficiary is the “first in line” of who will receive the asset upon your death. You can name a contingent beneficiary who is “next in line” to receive the asset if the primary beneficiary dies before you. A married person with children will commonly name the spouse as the primary beneficiary, and the children as the contingent beneficiaries. If you don’t name a contingent beneficiary and your primary beneficiary predeceases you, the asset will most likely be paid to your estate.

3. Do not name minors (under age 18) as direct beneficiaries. An insurance company or other financial institution cannot legally write a check to a minor. If a minor is named on a policy or account, then a court proceeding to nominate a conservator to manage the child’s money is likely to be needed. A conservatorship adds costs and delays. One possible solution is to name a custodian to manage the child’s money pursuant to the Uniform Transfers to Minors Act (UTMA). A drawback to both conservatorships and UTMA accounts is that they end when the child turns 18 or 21 and the child gets the funds outright.

A better solution, particularly if the payout is substantial, may be to create a trust to receive the asset on your death. You can choose the trustee who will look after the money and specify the ages at which your child should receive lump sum distributions. Common ages are 25 and 30. Simply creating a trust does not automatically mean that life insurance and other financial assets will pass into it on your death. You must complete the beneficiary designation form naming the trust as the beneficiary. An estate planning attorney can provide the proper language for naming a trust as a beneficiary.

If you would like to hear more about how our firm can help you plan for the future, contact us today. We would love to help.

We provide estate planning services to clients throughout South and Central Texas. Please contact us today, we are happy to share our expertise with you so you can make the best decisions for passing on your financial legacy. We are available in person, by appointment or by Zoom. In South Texas, call us at 956-791-5422.

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Molding Your Financial Future in 2025

January 17, 2025

As we step into the new year, I find myself reflecting on the countless entrepreneurs, professionals, and business owners I’ve worked with throughout my career. Helping clients mold a shield of protection around their assets has been one of the most rewarding aspects of my practice. Time and time again, I’ve witnessed that success isn’t reserved for geniuses, nor does it require a fancy degree. The secret lies in action, strategy, and discipline—traits anyone can cultivate to achieve and maintain wealth. The Myth of Instant Wealth How often have we heard someone say, “When I win the lottery, I’ll finally be set”? It’s a common refrain, but let’s examine the reality. Imagine winning $10 million in the lottery. After choosing the lump sum option and paying taxes, you might walk away with only a fraction of that—perhaps $2 million. Without a solid financial plan, it’s no surprise that many lottery winners end up broke within a few years. True wealth isn’t about luck or flashy possessions. It’s about what you do with your resources and how you protect them. If you look around your community, the truly wealthy aren’t necessarily the ones with the biggest houses or newest cars. They’re often the ones who’ve taken calculated risks, lived within their means, and built unglamorous but steady businesses. These individuals mold the clay they’re given, creating shields of protection around their assets that ensure their financial stability for generations. The Trap of Looking Rich We’ve all seen it—the big house, luxury car, and designer wardrobe. But appearances can be deceiving. Many who look wealthy are drowning in debt, spending more than they earn, and chasing the illusion of success. As my wife lovingly calls it, Dickersonism #7: “Looking rich does not MAKE you rich.” True wealth is built on a foundation of solid, income-generating assets, not consumables. Falling into the trap of “keeping up with the Joneses” (or Kardashians) often leads to financial instability and missed opportunities to create lasting wealth. The Cost of Inaction One of the greatest obstacles to wealth and protection is inaction. Henry Ford famously said, “If you think you can, you can. If you think you can’t, you can’t. Either way, you’re right.” Inaction is the path of least resistance, but it’s also the path to missed opportunities and unfulfilled potential. Some hesitate out of fear or over-analysis, a condition I call “analysis paralysis.” It’s easy to get caught up in what could go wrong, but this mindset keeps you stagnant. Every successful person I’ve worked with has one thing in common: they took action. They understood the risks but focused on the rewards, moving forward despite uncertainty. Setting Your Course for 2025 If you haven’t taken steps to mold your financial future, now is the time. Ask yourself: Where do you want to be a year from now? In five years? In ten? Define your goals and begin building the path to reach them. Just as importantly, protect what you’ve built. Not having a plan to shield your assets is like running exposed electrical wiring—sooner or later, you’ll face unnecessary risks. A board-certified estate planning attorney can help you design a plan to safeguard your wealth, ensuring it stays secure for you and your loved ones. Take Control of Your Future Success doesn’t just happen—it’s molded. Listen to trusted advisors, but remember that the final decisions are yours to make. Clarify your vision, take bold steps, and build the life you’ve always dreamed of. At The J.M. Dickerson Law Firm, we’re here to guide you every step of the way. Whether in person, by appointment, or via Zoom, we’re committed to helping you create a legacy of success and security. Contact us today, we can help! South Texas: 956-791-5422 Central Texas: 830-302-4577 Let’s make 2025 your year of action, growth, and protection.

Embracing the Holidays as a Time for Estate Planning

December 20, 2024

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Start the New Year Strong: Four Steps to Success

December 13, 2024

As the end of the year approaches, it’s easy to feel the weight of unfinished tasks and the hustle of the holiday season. Between wrapping up work projects, preparing for family gatherings, and making plans for the future, this time of year can feel overwhelming. But amidst the busyness lies a valuable opportunity—the chance to press reset and prepare for a fresh start. The New Year offers a clean slate, making it the perfect time to reflect, reorganize, and refocus your goals. By dedicating some time to the right activities now, you can set yourself up for success in the months ahead. Here are four key steps to help you start the New Year on solid footing. Step 1: Reflect on the Past Year As the calendar flips to a new year, many of us naturally find ourselves looking back at the previous 12 months. This is the perfect moment to assess your professional and personal accomplishments, challenges, and growth. Ask yourself: • What were my biggest successes this year? • What goals did I miss, and why? • What strategies or habits worked well for me? • Where can I improve moving forward? Reflection isn’t just about identifying wins and losses; it’s about understanding the “why” behind them. Seek feedback from colleagues, mentors, or trusted peers to gain new perspectives. The more honest and thorough your evaluation, the more valuable it will be as a foundation for future planning. Step 2: Create a Game Plan for the Year Ahead Reflection is only the beginning. To make real progress, you need a clear and actionable plan for the year ahead. Start by defining your big-picture goal for the next 12 months. What’s the most important outcome you want to achieve? Once you have that, break it down into smaller, measurable objectives. For example, if your goal is to expand your business, your smaller objectives might include increasing marketing efforts, attending networking events, or launching a new service. Outline the steps needed to achieve each objective and set realistic timelines for completion. Revisit your goals regularly—at least quarterly—to ensure you’re staying on track or to adjust for any changes in your circumstances. Flexibility is key to maintaining momentum throughout the year. Step 3: Declutter Your Inbox An overflowing email inbox can be a constant source of low-grade stress. Ending the year with a streamlined and organized inbox can give you a fresh sense of control as you head into January. Here’s how to tackle it: • Respond immediately to any urgent or unresolved messages. • Delete emails that are no longer relevant. • Unsubscribe from newsletters or mailing lists you no longer find useful. • Create folders and filters to better organize incoming messages moving forward. To keep your inbox manageable, schedule regular cleanups throughout the year. Whether monthly or quarterly, these maintenance sessions will prevent clutter from building up again. Step 4: Knock Out Small Tasks The small, unfinished tasks lingering on your to-do list can be more draining than you realize. Use this time to cross off as many as possible before the New Year begins. • File paperwork that’s been piling up. • Respond to emails you’ve been avoiding. • Wrap up loose ends on ongoing projects. Completing these small but nagging tasks will give you a sense of accomplishment and free up your mental bandwidth for bigger goals in the New Year. Starting January with a clean slate will allow you to hit the ground running. Your Fresh Start A new year is a chance to realign your priorities, set meaningful goals, and approach your work with renewed focus. By reflecting on the past year, setting actionable goals, decluttering your space, and tying up loose ends, you’ll create the foundation for a successful year ahead. Whether you spread these steps out over a few weeks or tackle them all in one day, the most important thing is to commit to the process. A little effort now can make a big difference in how you start the year—and how you finish it. Here’s to making the most of your fresh start!