The act of choosing a beneficiary lets everyone know who gets certain assets. Naming beneficiaries makes things easier for your family following your death. However, for this to work, there are mistakes you should avoid.
Forgetting to choose a beneficiary
Choosing a beneficiary is one of the most important parts of estate planning. However, some accounts, such as life insurance and retirement, allow you to choose a beneficiary later. That gives you time to carefully consider your choice but also allows you to procrastinate.
When you don’t name a beneficiary, someone else chooses what happens to your assets after you die. Your family might even have to pursue legal channels to claim your assets.
Not updating beneficiaries
Who you want as a beneficiary might change in your lifetime, so updating your paperwork to reflect the change could become important.
For example, you might get divorced and want to replace your former spouse with your current spouse as a life insurance beneficiary. If you forget to make this change, your former spouse will have a legal right to your life insurance benefits. According to Family Lawyer Magazine, this is one of the most common mistakes made when it comes to beneficiaries.
Getting the name of the beneficiary wrong
Getting details about a name wrong can result in delayed payouts or court battles. It’s important to get all the name details correct. For example, if a person is a junior, specifically put them as a junior on the paperwork.
The name of the beneficiary should match the name on the paperwork. If a person’s name changes because of divorce or marriage, it should be updated on the paperwork.
Beneficiary designations are a major part of estate planning. Naming beneficiaries allows you to decide who gets your assets when you die, but naming beneficiaries is only part of the task; it’s critical to be diligent and stay on top of your paperwork so that it reflects your wishes.