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Are you aware of mistakes that could impact your beneficiaries?

Estate plans can serve many purposes. When it comes to using this plan before your death, you can detail how you would like your medical treatments handled in the event that you cannot express your wishes yourself, and you can appoint individuals to handle decisions relating to your health care and your financial necessities during such a time. Your plan can also be useful after your death as you detail how you would like your property distributed, who should act as guardian of your minor children and other similar decisions.

After creating your plan, you may feel a sense of accomplishment, and you should. The information you provide in documents that make up your plan could help your surviving family in many ways. However, if you do not remember to periodically review and update your plan, your family could face issues when it comes time to probate your will and distribute your assets.

Beneficiary mistakes

Because estate planning is complex, room for error does exist. If you enlist the help of a knowledgeable professional, the risk of mistakes may decrease. However, while your plan at the time of its creation may cover all of your desires and needs for that moment in life, it may not cover changes that come about in the future, especially when it comes to beneficiary designations.

You can name beneficiaries in several ways. You can indicate in your will who should receive certain property, or name beneficiaries to trusts. You could also appoint beneficiaries for payable on death accounts, such as bank accounts. If you do name beneficiaries, you may have avoided the first potential mistake, which is to not name any beneficiaries at all. Other mistakes could complicate affairs, though, such as:

  • Not updating beneficiaries: If you do not update your designations, a person who was named but has since died may still be named in your documents, which could cause confusion. Additionally, you may have had another child or grandchild since you created your estate plan, and if you do not update, that child could miss out on inheritances.
  • Naming minors or special-needs individuals: Though you certainly do not want to unjustly omit a loved one from your will, you may want to remember that minors or special-needs individuals may need special considerations. Because you likely do not want to hand a minor or young adult a considerable amount of money or jeopardize a special-needs loved one's chances of receiving government benefits, you may want to utilize trusts with specific terms to account for these conditions.
  • Naming only one beneficiary: Another mistake you could potentially make relates to naming only one beneficiary. You may hope that by naming one individual as beneficiary to multiple accounts you will save yourself time and effort. You may believe that the named person will share the assets among his or her siblings or other parties, but that scenario may not take place as beneficiaries are under no obligation to share their bequests.

Other possible mistakes when naming beneficiaries could also take place, which is why you may want to pay particular attention to who you name and the changes you make to your estate plan as years go by.

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Leonard F. Berg, Attorney at Law