One important facet of estate planning is beneficiary designations. These designations are common on documents such as insurance policies and retirement plans. Although it may seem simple to put a name on a designation and forget about it, this can often lead to adverse consequences. A recent article discusses six things that can go wrong with beneficiary designation forms, and how to avoid them.
- Failing to Name a Beneficiary: Review all of your assets with beneficiary designations periodically to ensure that a beneficiary is named for each.
- Failing to Name a Contingent Beneficiary: For each beneficiary, name at least one contingent beneficiary in the event that the primary beneficiary predeceases you or disclaims the amount.
- Failing to Put Specifics in Beneficiary Designations: Be as specific as possible, for example, do not simply write “my children,” rather, use their names to avoid confusion that may occur with adopted or step-children.
- Failing to Keep Designations Up to Date: Importantly, review your beneficiary designations once every few years, and after major life events such as a marriage or divorce.
- Failing to Keep Beneficiary Designation Forms on File: Always ask for a copy of any beneficiary designation form so you can keep it with your records.
- Failing to Consider the Financial or Emotional Readiness of Beneficiaries: If you would like to name a young adult on a beneficiary designation form, consider whether it is wise to give them that amount of money with no strings attached.
