Certain types of assets, such as retirement accounts and insurance policies, come with beneficiary designations. These allow a person to name who will benefit from these assets upon his or her death. So, they are important estate planning tools.
It is critical to avoid mistakes when it comes to these tools. Today, we’ll discuss three common missteps people sometimes fall into when it comes to beneficiary designations.
Not naming a beneficiary: It is important to not forget to list beneficiaries for retirement accounts, insurance policies and similar assets. If a person dies without naming a beneficiary for these types of assets, the assets would likely go into his or her estate and into the probate process. This can make the distribution of such assets much more complicated than it needs to be. It could also lead to a result far different from what a person would have wanted.
Not updating designations: Major life events or even just the passage of time might lead to people’s views on who they would want to be their designated beneficiaries changing. If individuals fail to update their designations accordingly, they could risk their beneficiary designations being far different from what they would want when they pass away.
Using a will to try to change designations: One incorrect assumption people might make is assuming that they can use their will to change their beneficiary designations. It is important to know that wills cannot override such designations. If a will and a beneficiary designation differ on who they say will get a given asset, the beneficiary designation wins out.
Skilled estate planning attorneys can assist individuals with avoiding critical missteps when it comes to beneficiary designations and other estate planning tools.