Avoid these beneficiary naming mistakes with help from The Millman Law Group.
When creating or updating your estate plan, naming beneficiaries might seem like one of the simplest steps. However, it’s also one of the most common areas where costly mistakes occur. Beneficiary designations determine who will receive your assets—such as retirement accounts, life insurance policies, and investment accounts—after your death. Unfortunately, many people overlook key details or fail to update their designations, leading to confusion, legal disputes, and unintended outcomes.
Here are some of the most common beneficiary naming mistakes—and how to avoid them with the help of your Millman Law Group attorney.
Not Updating Beneficiaries After Major Life Events
Life changes, and your beneficiary designations should change with it. Too often, people forget to review their designations after significant life events such as:
- Marriage or divorce
- The birth or adoption of a child or grandchild
- The death of a previously named beneficiary
If these updates are neglected, your assets could end up going to someone you no longer intend to benefit. For example, an ex-spouse could inherit your retirement account simply because the form was never updated. Regularly reviewing your beneficiary forms ensures that your current wishes—not outdated paperwork—control where your assets go.
Naming Minors Without a Trust or Guardian
Another common mistake is naming a minor child directly as a beneficiary. Since minors cannot legally manage inherited funds, the court would have to appoint a guardian to oversee the assets until the child becomes an adult. This process can be expensive, time-consuming, and might place control of the funds in the hands of someone you wouldn’t have chosen.
A better approach is to establish a trust for your child’s benefit. You can name a responsible trustee to manage the funds and determine when and how the child receives their inheritance. This ensures the assets are protected and used according to your wishes—without unnecessary court involvement.
Overlooking Special Needs Planning
If you have a loved one with a disability, leaving assets to them outright could unintentionally harm their financial security. In many cases, receiving an inheritance directly could disqualify them from vital government programs like Medicaid or Supplemental Security Income (SSI).
To avoid this, consider creating a special needs trust. This type of trust allows you to provide financial support for your loved one while preserving their eligibility for public benefits. The trust can be tailored to supplement, rather than replace, the government assistance they rely on—offering peace of mind that their long-term care will be secure.
Forgetting to Name Contingent Beneficiaries
Naming primary beneficiaries is essential, but what happens if your primary beneficiary passes away before you do? If you haven’t named a contingent beneficiary (a backup), your assets may be distributed according to state law or added to your estate, which could trigger probate.
To prevent delays or disputes, always list both primary and contingent beneficiaries for each account or policy. This step ensures that your assets are transferred smoothly and according to your wishes, no matter what happens.
Failing to Coordinate with the Rest of Your Estate Plan
One of the biggest mistakes people make is failing to coordinate their beneficiary designations with their overall estate plan. Beneficiary forms operate independently from your will or trust. That means even if your will states one thing, the designations on file with your financial institutions will usually control.
For example, if your will leaves a bank account to your daughter but the account’s beneficiary form names your son, your son will receive the account. To avoid these inconsistencies, review all of your designations whenever you make updates to your estate plan. This ensures that every document aligns with your current goals and family circumstances.
Keep Your Beneficiary Designations Current
Beneficiary designations are powerful tools, but only when they’re accurate and up to date. A single oversight can undermine even the most carefully crafted estate plan. To protect your loved ones and ensure your legacy is handled as intended:
- Review beneficiary forms every few years or after any major life event.
- Coordinate your designations with your will, trust, and other estate planning documents.
- Consult with an experienced estate planning attorney who can help identify potential conflicts or risks.
Contact The Millman Law Group today to speak with an attorney ready to help you navigate the components of estate planning.
Estate Planning Made Easy With Millman Law Group
Millman Law Group, PLLC is rare because it’s one of the only law firms that offer life planning in South Florida. From life care planning to the preparation of detailed estate plans, Millman Law Group has committed to serving Floridian elderly communities in Boca Raton, Palm Beach County, Ocean Ridge, Hillsboro Beach, and many other areas since 2018. Our dedicated team also specializes in special needs Trusts and catering to any age demographic because we know for certain it’s never too early to start preparing you and your family for your future. For the latest news in estate planning and elder care law, follow us on Facebook, Twitter, Linked In, and Pinterest. You can also contact us at 561-463-6480.