Beneficiary designation mistakes you’ll want to avoid

On Behalf of | Aug 3, 2022 | Estate Planning And Probate

Making use of beneficiary designations can be an ideal way to get around North Carolina probate laws. However, there are many pitfalls that you’ll need to look out for when attaching one to a brokerage account, a life insurance policy or other assets. Avoiding these mistakes may help to ensure that your affairs are settled in a timely manner and in accordance with your wishes.

Make sure to actually name a beneficiary

Perhaps the biggest mistake that people make is not designating a beneficiary at all. In some cases, your spouse will automatically inherit property such as the funds inside of a 401(k). In such a scenario, it may not matter if you don’t get around to filling out a beneficiary designation form. However, failing to do so for other assets may mean that they revert back to your estate. The same may be true if your primary beneficiary is a minor, dies or becomes incapacitated and you fail to name a secondary beneficiary.

Don’t forget to review your choices regularly

Your brother, best friend or adult child may have been the best choice to receive your retirement, brokerage or other accounts when you originally filled out a designation form. However, if you become estranged from your sibling or your friend dies, you’ll want or need to choose a new beneficiary.

You might also want to take action if an intended beneficiary becomes incapacitated or is otherwise unable to manage property on his or her own. Failing to take action in a timely manner may result in assets being transferred to people who you don’t know well or who may not make the best use of a given item. Ideally, you’ll schedule annual estate plan reviews to catch these or other issues while there is still time to rectify them.

Reviewing beneficiary designations regularly may save your estate time and money. Furthermore, if these documents are structured properly, you may reduce the odds of a family conflict or legal challenge. This is because assets will go directly to their intended recipients with few questions asked.