Don't Let Your Beneficiary Designations Wreck Your Estate Plan!

One of the most common ways we see people wreck their otherwise well-executed estate planning documents is by failing to review their beneficiary designations on life insurance, retirement accounts, and other investment accounts. Not only is it important to make sure you have the right people, but you also need to understand how these beneficiary designations work for each company. Below are just a few common mistakes we see people make and what we suggest you do about them.

  1. Failing to name the right people as beneficiaries. We know life can be chaotic at times, but it is still important to review your beneficiary designations every couple of years. Many newlyweds, for instance, forget to update their beneficiary designation and still have at least one policy or account that lists one set of parents as the beneficiaries rather than the spouse. Typically this happens because they haven’t found the time to make the switch. It is also very important to make sure you haven’t named anyone who is deceased or disabled. And, of course, if you’ve recently gone through a divorce (or if you are legally separated and just starting the process) make absolutely sure your former spouse is not listed as a beneficiary on any of your accounts or policies.
  2. Not Getting a Receipt. It never hurts to be overly cautious when working with insurance and financial companies, because they do make mistakes. We strongly suggest that clients include a duplicate copy when sending forms to a financial or insurance company and request that the second copy be time-stamped and returned to the client to prove the company received the forms.
  3. Not Understanding what happens if a beneficiary predeceases you. Some companies will automatically pass those assets that would have gone to the beneficiary on to their heirs. Others will require you to check a box or make a request for this to happen. As an example, if you leave an account to your three children and one of them passes away in the same accident as you, will their children receive the child’s share or will it instead be split among your surviving children?
  4. Not Keeping Copies of All Beneficiary Designations with your Documents. It is important to keep all documents related to your estate planning, including the beneficiary designations, in the same place. This will help the person administering your estate know what they need to do and who they need to notify at your passing. We strongly encourage clients to keep a list of all of their assets, including policy numbers and account numbers, so that whoever is handling this process for you knows exactly what they need to be looking for.
  5. When in Doubt, Ask a Professional! Sometimes a company can be difficult to deal with, or their policies can be confusing. Rather than guess, consult your attorney or financial planner to make sure everything has been set up exactly the way it needs to be. This can be particularly true when making sure that assets will be funded into your trust as the language you use on the beneficiary forms is very important.

If you have any questions about your beneficiary designations or need help with any of the forms, please feel free to call our office to set an appointment to review them.

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