3. Name a person, not your estate, as beneficiary
Like life insurance, 401(k) accounts and the family home are shielded from creditors in some states. Other assets, including IRAs and payable-on-death bank and brokerage accounts, can also be difficult for creditors to reach because they have direct beneficiaries and don't go through probate.
The key to protecting those types of direct-beneficiary assets from creditors, experts say, is to specifically name an individual as the beneficiary, not your estate. "The worst thing you can do is name your estate as a beneficiary, but unfortunately I see people doing it all the time," Demeros said. "Anything you can keep out of probate is going to be harder for unsecured creditors to grab. But if you name your estate the beneficiary, that asset becomes part of the probate estate."
It's also a good idea to review your beneficiaries frequently, at least once a year, and to name a contingent beneficiary in case something happens to your first choice, said Stephen Silverberg, an estate planning lawyer in Roslyn, N.Y. "And if there's a box on the beneficiary form that says 'per stripes,' make sure you check it," he said. Meaning "of the body," in Latin, checking that box ensures that the benefits pass to the lineal descendants of your beneficiary if he or she dies before you do.
Read more:
5 steps to prevent your debt from haunting your heirs
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