When you start a new job, your boss makes you fill out forms about your retirement account and any employer-provided life insurance. You write someone’s name in the “beneficiary” box, then forget about it. Years go by, and you do not think about revisiting those beneficiary selections. In that time, you might have opened other accounts that require the designation of a beneficiary.
Many people give little thought to the person or persons they name as beneficiaries of their accounts and insurance policies, and seldom, if ever, update those selections. Regardless of what your will says, the designated beneficiaries will receive those assets one day. A New York estate planning attorney can help you avoid these four costly mistakes when naming beneficiaries:
- Records get lost. Let’s say that the human relations (HR) department at your place of employment kept the forms you filled out on your first day of work, like beneficiary designations. That company might no longer be in business because another corporation acquired it. Your original employer might not have transferred all of the paperwork to the new company. It would be best for you to keep a copy of all the essential forms you sign regarding accounts and insurance policies, including beneficiary forms.
- Updating beneficiaries is essential. You might have selected the love of your life as the person to receive your life insurance proceeds. Years later, that person might not be a part of your life. People break up, divorce, or die. You might have a child now. If you do not check and update your beneficiary designations periodically, some people might get a pleasant surprise one day while others receive shocking bad news.
- Leaving the “beneficiary” line blank. If you do not designate someone as your beneficiary, one day, the asset will go to your estate. Even if the same person as you would have named eventually receives the asset, she will have to wait a year or two (or longer) for your estate to go through probate. The asset will likely be worth less than face value because of the expensive cost of probate. If you had selected a beneficiary of a life insurance policy, on the other hand, the person could receive the entire amount of the money within a month or two of your death.
- Forgetting to select contingent beneficiaries. Life is unpredictable. The beneficiary of your retirement account or life insurance policy might die before you do. He might prefer that someone else receive the money instead of him. For example, if you name your spouse as the beneficiary, he has the option to decline the asset, allowing the contingent beneficiary, like your child, to get the money. If you do not name a contingent beneficiary, the asset will have to go through probate and get distributed through your estate. You might not be delighted about who would receive the asset on that path.
Any of these mistakes could bring financial hardship to your loved ones after your death.
Contact us today. Our New York estate planning attorneys can help you avoid these and other problems and craft an estate plan to protect your intended beneficiaries.