While wills are a crucial aspect of estate planning, they are not the only tool in your arsenal. Certain assets include beneficiary designations, which are documents that stipulate who should receive assets after you are gone.
Beneficiary designations accompany life insurance policies and retirement accounts, and estate planners must fill them in correctly for the best outcome. The following are a few common beneficiary designation mistakes and how you can avoid them.
You will have the chance to complete beneficiary designation forms when you purchase a life insurance policy or open a retirement account. If these forms are incomplete, the proceeds from these assets may not go to your intended heirs. In some cases, a lack of beneficiary designations means that your spouse will likely receive funds. However, financial companies can implement their own rules when it comes to the disbursal of assets.
You will also need to update beneficiaries over time to ensure they continue to meet your needs. If you fail to make updates, the existing beneficiary designation will take precedence over other estate planning tools. For instance, beneficiary designations supersede your will, which highlights the importance of reviewing your entire estate plan every few years.
Naming a minor as a beneficiary can complicate your estate plan since minors will be unable to accept these funds. Instead, you must name a conservator, who is a person who will oversee the funds until the heir reaches adulthood. In this case, you may want to make other arrangements for young heirs, such as establishing a trust.
Beneficiary designations are an essential part of your estate plan. As a result, you must take the proper steps to ensure your assets go to the correct individuals.