The #1 Estate Planning Goof-Up

When you are planning for the future of your estate, you want to make sure you cover all of your bases. There is one common mistake that many Americans make. This seemingly simply mistake can eventually lead to devastating consequences when you pass away and your heirs prepare to inherit your estate. This major mistake is a simple one. Many Americans forget to update the names of their beneficiaries for their employer-sponsored retirement plans, IRAs, life insurance policies, bank accounts, 529 college savings plans, brokerage accounts, annuities, and mutual funds.

If your beneficiaries are out of date when you pass on, your assets may go to the wrong people. No matter what your will says, these accounts will be distributed to the listed beneficiary. If the listed beneficiary cannot take on the benefits for some reason, such as death, then the courts will decide who will receive the accounts. Typically, the courts will decide that a spouse or ex-spouse is the first choice. This means that an ex-spouse you are not particularly fond of could end up being the heir of all of your trusts and funds.

Most individuals are required to designate a beneficiary when they buy insurance or sign up for a retirement plan. Chances are that you also filled out payable on death or transfer upon death certifications on these accounts when opening them. You probably named beneficiaries on the accounts at the time. Yet your life and wishes may have changed since then. It is highly suggested that you review all beneficiary designations on an annual basis to determine if there are any that are out-of-date. You may even want to name secondary or contingent beneficiaries that can receive the funds should your first choice fall through for a variety of reasons.

If you do not update your beneficiaries, then the funds and accounts will go to probate and will be distributed according to the state law. Beneficiary designations that are not consistent can wreak havoc. If you want more information about this common mistake or want to learn how to avoid this goof up, contact an attorney who works with estate planning and probate using this directory!