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Mistakes to avoid with beneficiary designations

On Behalf of | Jun 24, 2020 | Blog, Estate Planning |

Beneficiary designations may be a part of many people’s Florida estate plans. Retirement accounts and life insurance policies are the assets most commonly passed using this form, and they are filled out when people set up the accounts or purchase the policy. Unfortunately, it can be easy to subsequently forget about them.

People may have one or more 401(k)s or similar accounts with previous employers, and the beneficiaries listed on them might be out of the date. This was the case for one man who found that he still had his wife listed as primary beneficiary on an account despite getting a divorce 15 years earlier.

Another common problem is not updating the form when a beneficiary dies. When one woman failed to do so after one of her three children died, the two surviving children split her IRA that was worth more than $1 million on her death. The woman had not clarified whether the third child’s inheritance should be split in this way or passed on to their children. This landed the family in litigation. People should not make the error of thinking they can resolve any issues with beneficiary designations in a will or trust since these documents do not override them. Beneficiary designations, along with wills and trusts, should be reviewed regularly and updated if necessary.

An attorney may be able to explain whether changes in the law mean that a person’s estate planning strategy might be out of date or might be able to suggest better strategies based on the person’s situation. For example, while a revocable trust is commonly used, if a person needs to protect assets from creditors and similar threats, an irrevocable trust might be a better solution. An attorney might also help make preparations in case the person becomes incapacitated.


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