Estate planning is not just for the wealthy: Everyone should have a plan in place for what will happen to their assets when they die. One important part of estate planning is designating beneficiaries. Beneficiary designations are often overlooked, but they can be very important in ensuring that assets are distributed according to your wishes.
What are beneficiary designations?
Beneficiary designations are legal documents that designate who will receive your assets when you die. The assets can be anything from bank accounts to life insurance policies. You can name anyone as a beneficiary, including your spouse, children, parents or other relatives.
What are the benefits of beneficiary designations?
First, beneficiary designations can help you to avoid probate. Probate is the legal process that is used to distribute your assets after you die. It can be time-consuming and expensive. Second, beneficiary designations can help you to control who receives your assets.
You can designate exactly who you want to receive each asset, and you can change the beneficiaries at any time. Beneficiary designations can help to ensure that your assets are distributed according to your wishes.
What mistakes do people make with beneficiary designations?
One of the most common mistakes that people make with beneficiary designations is not updating them. If you have a beneficiary designation in place, it is important to review it periodically and update it as you would other estate planning documents. You should also keep your beneficiaries informed about your plans. Another mistake that people make is not naming alternate beneficiaries.
If your primary beneficiary is unable to receive the assets for any reason, it is important to have someone else in mind. Lastly, people sometimes make the mistake of not having beneficiary designations at all. A will does not control beneficiary designation assets, so if you die without one in place, your assets may not go to the people you want them to go to.
If you don’t have a will or beneficiary designations in place, now is the time to take care of it. You should also make sure that your beneficiaries are aware of their status. This can help to avoid any confusion or conflict later on.