Mistakes with beneficiary designations can be costly.
Many people believe a will determines how all your assets are distributed.
They are misguided.
Because of this they often make critical estate planning mistakes.
According to a recent Kiplinger article titled “Beneficiary Designations: 5 Critical Mistakes to Avoid,” these mistakes center on beneficiary designations.
Beneficiary designations are means by which certain assets or accounts pass to your heirs when you die.
Typically retirement accounts, annuities, life insurance policies, or transfer on death accounts pass via beneficiary designations specific to the asset or account.
These can be helpful when it comes to distributing your assets, as these will pass directly to the beneficiary rather than through probate.
All that is needed to transfer ownership is your death certificate.
When done right, they are helpful.
If not, they can be costly.
How do you avoid making a costly mistake?
Name a beneficiary.
Start by naming a beneficiary on the asset or account.
Especially when you fill out the paperwork for your retirement plan, purchase an annuity or a life insurance policy, you will be directed to name a beneficiary.
Leaving this section blank is a huge mistake.
In fact, you should designate primary and contingent beneficiaries.
In Kansas and Missouri, state law allows you to utilize non-probate transfers of almost everything except untitled assets (think furniture, photos, clothes, jewelry, dishes, etc.).
Consider special circumstances.
Do you have a loved one with special needs?
Naming this individual as a beneficiary can cause him or her to lose government benefits.
Does your loved one lack financial responsibility?
Naming him or her directly could fuel an addiction or be subject to creditors.
A trust may serve as a better beneficiary in these cases.
Name the right beneficiary.
Your family may have members with the same name.
Be sure to designate the correct one to receive your money.
Update your beneficiaries.
Did you marry, remarry, or divorce?
Did you have a baby or lose a loved one?
You will want to review your beneficiary designations to reflect your new circumstances.
Inform your attorney.
Beneficiary designations are an important part of your estate plan.
Working with your experienced estate planning attorney will help you create (and maintain) a plan to meet your goals.
Reference: Kiplinger (April 5, 2019) “Beneficiary Designations: 5 Critical Mistakes to Avoid”