Beneficiary designations can be easily messed up.
You can have a will.
You can create a trust.
Even so, you may be neglecting an important aspect of estate planning.
According to a recent Delco Times article titled “Five mistakes to avoid when naming beneficiaries,” you need to make sure your beneficiary designations are in alignment with the rest of your estate plan.
How do you do this?
Name beneficiaries to accounts.
Some accounts pass through beneficiary designations rather than through a will or trust.
These include life insurance, 401(k) accounts, and transfer-on-death accounts.
If you fail to name a beneficiary, these assets will be subject to probate.
In this scenario you could cost your heirs time and money.
Lots of time and lots of money.
Name a contingency beneficiary.
You cannot predict when you will die.
You cannot predict when your loved ones will die.
If your beneficiaries die before you, then you will want to name others to receive the assets.
If the person you designate as the primary beneficiary without designating a contingent beneficiary, then the asset will likely pass through probate by default.
Review beneficiary selections regularly.
Because these designations override a will, they should be up-to-date.
What happens if you fail at this task?
Communicate with your loved ones.
Your estate planning should not be a secret from those close to you.
Discuss your wishes and your reasoning with them.
If they know what to expect, you can keep your loves ones from fighting or from having hurt feelings when you die.
These are not simple conversations, but it is important to talk with your beneficiaries about what to expect.
Reference: Delco Times (October 6, 2019) “Five mistakes to avoid when naming beneficiaries”