Certain assets, such as life insurance policies and financial accounts, use beneficiary designations to identify heirs. Upon a person’s death, heirs receive proceeds from these assets according to the beneficiary designation documents.
Even a minor mistake can potentially cause problems for your loved ones. That is why you must actively address common errors and oversights associated with beneficiary designations.
Not updating designations regularly
Failing to update your beneficiaries can result in assets going to the wrong person. In this case, disputes among your loved ones are likely. Make it a habit to review and update your beneficiary designations regularly, especially after major life events. Marriage, divorce, births and deaths can all impact your estate plan.
Failing to name contingent beneficiaries
Designating primary beneficiaries is important, but naming contingent beneficiaries is equally so. Contingent beneficiaries are individuals who will receive your assets if the primary beneficiary is unable to do so. Without contingent beneficiaries, your assets may end up in probate, which is often a lengthy and expensive process.
Ignoring tax implications
Naming beneficiaries without considering these tax implications can result in an unnecessary financial burden. In this case, there may be a better way to disperse assets that does not entail exorbitant fees. Consult with a tax professional to make informed decisions accordingly.
Not coordinating beneficiary designations
Remember that beneficiary designations are part of your estate plan. As a result, you must ensure that your beneficiary designations align with the rest of your plan. For example, if your will specifies different beneficiaries than your life insurance policy, conflicts may arise.
Not providing sufficient information
Make sure your beneficiaries are aware of their designation. Also, your heirs should have access to relevant information, such as policy numbers and contact details of financial institutions. Failing to communicate your beneficiary designations can lead to confusion and delays in accessing assets after your passing.
Your estate plan safeguards your loved ones, but it also offers substantial peace of mind. By treating beneficiary designations with care, you can rest easy knowing your estate plan adheres to your wishes.