When it comes to estate planning, beneficiary designations are one of the most important aspects that should not be overlooked. Unfortunately, many people in Indiana make critical mistakes when filling out these forms, which can have devastating consequences down the road. By being aware of the following four common traps and how to avoid them, you can help ensure that your assets are distributed according to your wishes.
Failing to update their beneficiary designations after major life events
Circumstances are bound to change as life goes on; therefore, your beneficiary designations or terms of your estate planning documents should also be modified as needed. For example, if you have gotten married, divorced, had children or grandchildren or experienced any other major life event, you may need to go over your plans.
Not naming the right beneficiary
Something as trivial as a misspelled name or an outdated contact can invalidate a beneficiary designation. The same applies to having beneficiaries with the same names. To avoid this trap, you’ll want to be very accurate with such matters by including their full names and identifying information, such as social security numbers or dates of birth.
Ignoring special circumstances
It’s important to consider any special circumstances that may apply to your loved ones. For example, if you have a disabled child or grandchild, you’ll want to ensure their share of your assets is appropriately managed and protected.
Likewise, if you have beneficiaries who are minors, you’ll need to designate a responsible adult to manage their inheritance until they reach the age of majority. And, if you have beneficiaries who live in another country, there may be special tax considerations or other issues that need to be considered.
Failing to list contingent beneficiaries
Also, it’s important to designate a primary and a contingent beneficiary for your assets. A contingent beneficiary is someone who will receive your assets if your primary beneficiary dies before you do. If you don’t name a contingent beneficiary, your assets will go through probate and be subject to the laws of intestate succession, which may not be in line with your wishes.
Taking the step to create an estate plan is one of the best things you can do for yourself and your family. But it doesn’t end there; you also need to ensure that your estate plan is up-to-date and accurate. Making mistakes could be as costly, tedious and time-consuming as dying without any plans.