In addition to creating a will, you must designate beneficiaries to receive any assets that you owned. In the state of New York, the intestacy laws will apply if you do not designate a beneficiary. It is important that you name your beneficiaries, because without anyone named specifically, the state will dictate how your assets are distributed among surviving family members.
In most cases, a person will designate more than one beneficiary. A beneficiary is a party that will receive an inheritance upon your death. The amount of their inheritance is dictated by your will. You can name multiple beneficiaries, and they will typically involve family members. In some cases, you may want to designate a charity, coworker, or even just a friend as a beneficiary. Who you select is entirely up to you. You have the right to forgo traditional naming tactics, including not naming any loved ones as a beneficiary and instead selecting a charity as your sole beneficiary.
Without any beneficiaries named for your assets, including any New York State or local retirement system accounts, while your estate is going through probate, the judge will determine which beneficiaries are suitable for receiving your assets.
Why Is It Important to Designate a Beneficiary on Your Retirement Accounts and Bank Accounts?
Beneficiary designations for financial accounts and retirement accounts are completely different from those you name in your will. Your beneficiary designations for these types of accounts are what the court will honor upon your death. You can designate anyone for this beneficiary role, including an organization or trust. You are not required to select a spouse or family member.
In the state of New York, you can select a primary beneficiary and a contingent beneficiary.
- The Primary – Your primary beneficiary is the party that will receive your benefits upon your death. You can name more than one party for the primary beneficiary role, but you will want to dictate how much of the death benefit each primary beneficiary receives. For example, you might provide one primary beneficiary with 60% of your assets and the other primary beneficiary receives 40%. If you do not leave a percentage, then primary beneficiaries will all receive equal shares of the death benefit.
- The Contingent – You may also name a contingent beneficiary. This party would receive an inheritance only if the primary beneficiaries are no longer alive to receive their half of your death benefit. Contingent beneficiaries will also share the death benefit equally unless you create portions for each party.
What If You Have No Will; Therefore, No Beneficiaries?
The most common situation is when a person dies without a will. If you were to pass away without a will, the court would have no document indicating which parties will receive an inheritance from your estate assets. Therefore, the court will use the existing statutes to determine the rightful beneficiaries. These selections by the court may not be the parties you would have picked yourself.
This is why it is critical to create a will and name your beneficiaries to avoid having the court pick for you. Without a will, your estate goes through the probate process. One exception, if you die without a will, is that any jointly owned property under $30,000 is filed as a small estate under New York laws. Most jointly owned property will automatically pass to the joint owner. However, the court will still need to decide if the joint owner can inherit the property.
When you die without a valid will, you are considered intestate by the state. All state succession laws now determine the distribution of your assets. Various surviving relatives will receive a portion of your assets, but the typical order involves surviving spouses 1st, children 2nd, and remaining family members as the court sees fit.
In a typical probate court proceeding with a valid will in place, the executor of the estate is distributing assets based on the designations left in the will. If you die without a will, the judge must first appoint an executor to handle your estate. Instead of following a will for distributing assets, the court appointed executor will follow all New York intestate laws to divvy up your assets.
What about Surviving Spouses?
New York does have spousal rights of election when it comes to inheritances. The law allows the spouse to receive an inheritance of $50,000 or 1/3 of the deceased assets. If a spouse does not receive this amount, they have the right to request it in court as long as they do so within six months after the court appoints an executor for the estate.
When a person is married to another individual, but they have no biological or adopted children together, and there are no children from a previous marriage, the court typically gives all assets to the surviving spouse. If there are biological or adopted children, the court will provide the surviving spouse with the first $50,000 in assets before dividing the remaining assets equally among any adopted or biological children.
It Is Not Worth the Risk to Not Name a Beneficiary
Whether you do not have a will or you have no designations on your financial accounts, leaving it up to the statute is never a good idea. Doing so only means that certain parties will receive an inheritance that you may have otherwise not provided them with. The only way to control which loved ones or charities receive your assets is to create a will and complete your beneficiary designations on all financial accounts.
If your situation changes, such as getting a divorce, it is imperative that you update your beneficiary designations and your will to reflect that change. It is best to meet with an estate planning attorney to ensure that all of your bases are covered when it comes to naming beneficiaries. When you do not have an attorney creating your will or reviewing your existing assets, you run the risk of leaving it open for the court to decide on your behalf.
Meet with a Local Estate Planning Attorney Now
Whether you are creating a new estate plan or you would like to revise an existing one, schedule a free no-obligation consultation with attorney, Andrew M. Lamkin, P.C., now. Schedule an appointment by calling us today or requesting more information online.