The Most Important Mistakes to Avoid When It Comes to Naming Beneficiaries
We’ve previously discussed the importance of beneficiary designations and keeping them updated in order to ensure that certain assets such as your 401(k) and life insurance policies are passed on in accordance with your wishes. Below, we also discuss some of the most common mistakes when it comes to naming beneficiaries and how you can best avoid making these mistakes:
Forgetting to Cover All Accounts
Many people do not realize just how many different accounts they have that are subject to beneficiary designations versus instructions left in your will. Keep in mind that, if you forget to name a beneficiary for a given account, that account then becomes part of your estate and will become part of the probate process, and with probate comes the loss of a number of benefits and advantages, such as stretching out payments over a lifetime.
Always Put a Contingent in Place
Another common oversight that people make is in naming the same loved one(s) over and over again for all of these accounts as primary beneficiaries, but failing to name what’s known as a contingent beneficiary, or someone who receives the benefits of the account if the primary beneficiary is unable to. If you fail to do so, and your primary beneficiary is unavailable, once again, the account/funds go through probate. Keep in mind that naming a contingent also provides the primary beneficiary with an option to have some of the assets go to the contingent if, for example, they have tax-related concerns or for other reasons.
Use as Much Specific Identifying Information as Possible
This may come as a surprise, but another common mistake is that people fail to list specific identifying information in their beneficiary forms, such as social security numbers, etc. In fact, some even fail to list specific names and instead refer to their beneficiaries as “aunt x” or just “children,” for example. This can result in disaster in some circumstances; for example, sometimes children and stepchildren aren’t treated interchangeably if “children” is all that is listed. Or another possibility is that a family member who you did not intend to be a beneficiary could come forward and try to claim that you were referring to them in your designation.
Updates & Communications
Make sure that you keep your beneficiary designations updated, as they are the final word on the accounts that they apply to—not your will. Also make sure that you communicate your legacy wishes: While you do not need to share the specific financial amounts, for example, sharing other high-level details that you deem to be important and relevant to them can provide your loved ones with important insights into your intentions.
The Right Estate Planning Attorney
If you live in Florida and have any questions about beneficiary designations, probate, or estate planning, contact our experienced Orlando probate attorneys at the office of Gierach and Gierach, P.A. today to find out how we can help.