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Common beneficiary designation mistakes and oversights

On Behalf of | Apr 19, 2019 | Estate Planning

For most people being proactive about estate planning in Georgia, one of the common steps taken is to name beneficiaries. This can be an effective way to ensure specific loved ones receive assets directly and as intended. However, there are certain beneficiary designation mistakes that can just as easily cause legal headaches and family squabbles when it comes times for estate plans to go into effect.

A frequent beneficiary designation mistake people make is to not name beneficiaries for retirement accounts or life insurance policies. If no beneficiary is named, payout determinations will be based on guidelines established by the financial company or insurer. In some cases, this could mean unpleasant tax consequences. Not taking special situations into account can also create problems. For instance, assets inherited by a special needs child may make him or her ineligible for government benefits. One solution is to create a trust that’s named as the beneficiary. This allows the estate creator to name a trustee to claim and manage assets for intended recipients in a way that’s appropriate.

Filling out beneficiary designation forms incorrectly can be just as problematic. This sometimes occurs when beneficiaries change their names because of marriage or divorce or when there is a failure to use the correct legal name, such as omitting Jr. or II after names. Not updating beneficiaries over time can also create issues, especially if certain individuals are either deceased or can no longer manage assets.

Another misstep with estate plans in general is not periodically reviewing them with an estate planning attorney and/or financial adviser. If there is a desire to make adjustments, a lawyer can make appropriate changes in a way that’s in accordance with state regulations. In some situations, an attorney may also be able to identify gaps in an existing estate plan that might be correctable with the inclusion of additional documents.

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