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Why Should You Designate an Alternate Beneficiary?

Life is full of uncertainties, so you will want to name at least one alternate beneficiary when planning your estate. This serves as a precautionary measure in the event that your original beneficiary dies before you.

What Is an Alternate Beneficiary?

An alternate beneficiary is exactly as it sounds. It’s a person who you name in your will to inherit assets and property from you after you pass away. However, as an alternate, this person is a backup if your first choice of beneficiary happens to die before you. If you only had one person listed as your sole beneficiary, and he or she died before you, it would result in a problem as to who would receive an inheritance from your estate.

Why Should You Name an Alternate Beneficiary?

It’s important to name at least one alternate beneficiary in case you outlive your primary beneficiary. For example, you’re married and name your spouse as your beneficiary. You two don’t have children together, and you don’t have any children from a previous relationship. Your spouse unexpectedly ends up dying in a car accident, leaving you without an alternate beneficiary.

An estate planning lawyer can help you prepare your will and other estate planning legal documents. He or she can help you choose an appropriate alternate beneficiary as well.

Another good reason to list an alternate beneficiary, or a few, is that even if your original choice outlives you, they could end up changing their mind and not want to inherit anything from your estate.

What Happens If You Don’t Have an Alternate Beneficiary?

Without an alternate beneficiary, if your original beneficiary passes away before you do, the inheritance you intended to leave is considered to have lapsed or failed. The assets and property you meant to leave your beneficiary may end up going to that person’s family members instead. However, if you didn’t create a will, the state will distribute your assets to your immediate family members. For example, if you intended to leave your assets to your child, but he or she died and you didn’t list an alternate beneficiary, your grandchildren would be the heirs who inherit the assets instead. This is known as the anti-lapse law.

What Documents Should You Have in Your Estate Plan?

Effective estate planning requires you to have certain important documents in place when preparing for the future. Some of them may affect you personally while others can affect your loved ones, your assets and your property. In addition to a will, you should create a living trust and powers of attorney. A living trust is also known as a revocable trust and is designed to hold assets and property you wish to avoid going through probate. You can also protect those assets and property that you wish to ultimately leave to family members. The trust can ensure that each beneficiary receives what you designate to them upon your passing.

At the very least, you should also have a health care power of attorney and a financial power of attorney. A health care power of attorney allows you to choose a person who will make sure that your wishes are met for your medical treatments in the event that you ever become incapacitated and unable to communicate your wishes yourself. A financial power of attorney is a person who will oversee your financial matters if you’re incapacitated or otherwise unavailable.

You should periodically update all these important documents to ensure that everything is current. Of course, this includes updating your beneficiaries if someone passes away before you do, or you get divorced and remarry someone new. Staying on top of these matters can help you stay well-prepared for the future.

If you are in New Jersey and need to speak with an estate planning lawyer, contact the Knee Law Firm at your earliest convenience. You can reach our Hackensack office at (201) 996-1200.