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What do you know about out-of-date beneficiary designations?

On Behalf of | Nov 17, 2021 | Estate Planning |

Once you take care of your estate, do you plan to look at the essential documents again? Adopting a set-it-and-forget mentality could cost you and your beneficiaries.

CNBC explores the dangers of outdated beneficiary designations. Learn how to avoid this costly oversight.

Major life events

If you marry, divorce or have a baby after creating your estate plan, it makes sense to review your beneficiaries. Major life events may call for major overhauls of your estate and the people you want to support after your death. For instance, say you divorce your current spouse. Even if you leave everything to your adult children in your will, you must change your individual retirement account beneficiary. If you do not, an ex-spouse could receive your retirement account. Beneficiary statements take precedence over estate plans.

Custodian missteps

Do not leave beneficiary changes to your plan administrators or custodians. Even if estate planning documents list your desired beneficiary, your custodian or administrator could make a mistake. To avoid unnecessary disasters, complete all estate planning documents yourself. For paperwork others sign or others already signed, double-check that they list the right beneficiaries. It is not unusual for financial institutions to note trust trustees as beneficiaries.

Improper beneficiaries

Other than outdated beneficiaries, avoid naming improper beneficiaries. Choosing financially irresponsible or underage individuals may cost you. Do you have beneficiaries in high tax brackets? If they stand to become part of an even higher bracket, you may want to rethink the designation.

Schedule regular reviews of your estate plan. That way, you know the plan always reflects your current beneficiary desires.