While wills are a crucial aspect of a solid estate plan, they are not the only way to distribute assets to heirs. When it comes to things like life insurance policies and retirement accounts, beneficiary designations ensure the proceeds pass directly to your heirs after you die.
The information contained within beneficiary designations supersedes your will and other estate planning documents. Accordingly, you must avoid common beneficiary designation mistakes to ensure your heirs receive your assets based on your wishes.
Make sure names are accurate
Typos and mistakes when filling out designation forms probably will not prevent your heirs from receiving their assets. However, they can make the asset transfer process a lot more complicated. In this case, your heirs will be without their inheritances until the issue resolves. As a result, you must check and re-check designations for accuracy. You should also consider having an attorney review them and your estate plan.
Take the age of the heir into account
Beneficiary designations allow assets to pass to heirs directly after you die. If you are leaving funds to a minor, it is best to consider another estate planning vehicle. For example, trusts allow you to place terms on an inheritance, such as specifying an age when the person will receive it. You can also name a guardian within your will, who will assume responsibility for the child and their inheritance until they reach a legal age.
Update designations as needed over time
You should also review your designations to ensure they continue to meet your needs. New marriages, divorces, the birth or adoption of a child, and other major life events can call for an update to your estate plan. Remember, the court will honor beneficiary designations over other estate planning documents.
Even if no major changes occur, review your entire estate plan every three years or so. Regular review protects your assets and your loved ones after you are gone.