When it comes to retirement accounts and life insurance policies, beneficiary designations dictate who receives what. As a result, proper management must be a part of your overall estate planning strategy.
Keep in mind that designations supplant other estate planning tools. As a result, common beneficiary designation mistakes can derail your entire estate plan. Here are a few of those mistakes and how to avoid them.
Using the wrong name
When opening a retirement account or life insurance policy, you must complete a beneficiary designation form to stipulate who you wish to receive these assets. It is crucial that you fill in the correct name to ensure the funds go to the intended recipient. An issue may arise if a person has changed names due to a new marriage or divorce.
Failing to fill out forms
If you fail to complete beneficiary designation documentation, certain rules will come into play. These rules dictate who will receive assets, which can mean that your desired estate plan does apply. When it comes to married couples, it is likely that your spouse will automatically receive the assets after you die. However, the probate estate may also receive assets, which can lead to a lengthy legal battle for your loved ones.
Forgetting to update forms
Your estate planning needs and desires will probably change over time. As a result, you must conduct a review of your estate plan on a regular basis. In addition to reviewing wills and trusts, also take a moment to look over your beneficiary designations to ensure they are accurate. If not, update them immediately to ensure they are in line with your desires.
Proper planning and consideration are key when it comes to your estate plan. By taking the above steps, you can rest easy knowing your plan is complete.