HerWealth.com outlines “7 Common Mistakes to Avoid When Naming Your Beneficiaries” to give readers some ideas about just how even the most well-intentioned estate planning can go awry.
You may already know that if you leave no will or estate documents, the courts will decide who gets your assets, but did you know that if you name your estate as the beneficiary your money will still go through probate?
And those parents who decide to name the child they consider to be the most responsible as a sole beneficiary have no way to guarantee that this child will distribute the wealth among all heirs. In the same vein, a parent who puts a different child’s name on different accounts may not realize that value of these accounts could vary significantly when it is time to inherit.
People who don’t periodically check and update beneficiaries may leave money to someone they didn’t intend to inherit (such as an ex-spouse). Or they may unintentionally leave someone, such as the youngest child who was a surprise, with no inheritance.
Even if you create a trust with your will, making a minor child the sole beneficiary on some accounts or life insurance policies will mean that the child gets a lot of money at 18 or 21. This may not be a good thing, depending on the child. On the other hand, there could be a very capable minor who won’t be able to access needed funds. You can make a trust the beneficiary for things like a life insurance policy with stipulations for how the money will be distributed.
Perhaps you’ve seen TV shows or movies where someone write their own will and then goes to a notary. Often it is not as simple as that. As HerWealth.com states:
“Designating beneficiaries incorrectly, among other mistakes, can have far reaching negative consequences. Beneficiary designations are an important part of your overall estate plan and should be reviewed and updated as part of a well-coordinated estate plan with the help of an estate planning specialist. “