A key part of estate planning is designating the beneficiaries for your finances and assets upon your death. It is your responsibility to name your beneficiaries, and if you fail to do so correctly – or not at all – this can create many issues for your family members after your passing. The following beneficiary designation mistakes should be avoided to ensure a smooth transition of your assets after your death. Your estate planning lawyer at The Millman Law Group is an excellent resource for ensuring that you don’t make these errors.
Failing to Consider Your Will
Something important to remember when designating beneficiaries is that naming those beneficiaries overrides your will or trust plan already in place. For example, if you state in your will that everything goes to your spouse but you designate your children as beneficiaries of a savings account, only your children would receive that account. You want to make sure if you change your estate plan, or designate beneficiaries, that your wishes in both documents are aligned.
Not Counting for All Assets
Before you start determining what you want to leave to your beneficiaries, you must create a comprehensive list of what makes up your estate. Include items such as:
- 401(k), 403(b), or other retirement accounts
- Life insurance policies
- IRA accounts
- Bank accounts
- Real estate, including your home or any investment properties
- Business interests
- Personal property
Failing to Create a Plan
Once you have a complete list of your assets, it’s time to figure out distribution. You may consider selecting your spouse, children, or grandchildren as beneficiaries. You will also consider whether you want to provide for outright distributions or leave funds in a trust to provide access over time. Trusts, in general, provide you with more control over asset distribution.
Failing to Designate a Beneficiary
If you forget to designate a beneficiary, this can lead to many problems. For example, if you fail to name a beneficiary to your retirement account, the account could get passed on to your estate. If that happens, your heirs may be required to take taxed distributions.
Additionally, even if you name primary beneficiaries, it is also worth naming secondary beneficiaries. This is a good backup plan if your original choice is unavailable or declines their inheritance.
Not Reviewing or Updating Designations
It can be appealing to “set it and forget it” with your estate plan, but failing to update your beneficiary designations can be a problem. If previously-named beneficiaries die or new family members are added to your family tree, you should update your estate to ensure that everyone is accounted for. If you fail to do so, you may be unable to guarantee that your wishes are honored.
Ignoring the Financial Impact on Your Beneficiaries
If you are designating an inheritance of a large amount of money or property, you should consider whether that inheritance may hurt a beneficiary’s finances. For instance, naming a young adult child to receive a large sum may result in unwise choices if they are ill-equipped to handle a sudden increase in wealth. In this instance, it’s worth discussing with your lawyer how trusts can help you distribute smaller amounts of the inheritance over time.
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.