The bad news is that there are enough beneficiary mistakes to warrant two blog posts. The good news is that all of these are preventable with just a little planning. Let’s take a look at some of the other common errors you might be making with beneficiaries and what you should do instead.
Mistake #4: Not Naming a Contingent Beneficiary
Remember how the post yesterday talked about not updating your beneficiaries enough? This is particularly problematic if you never name a contingent beneficiary and the original beneficiary has passed away or not updated. If you’re not sure whether you named it, contact the company in charge of your account. Get the paperwork if you need to add one.
Mistake #5 Forgetting to Remove Your Former Spouse
In some states, a divorce does not automatically remove a spouse from a product like a retirement account, qualified plan, or life insurance. As soon as you have obtained a divorce, it’s a good time to update your documents appropriately. Don’t forget to add a primary and a contingent beneficiary..
Mistake #6: Naming a Minor Child as a Life Insurance Beneficiary
This has good intentions, but a life insurance company won’t payout to a minor. This usually means that a court proceeding has to be initiated to establish a conservator or a custodian, ultimately delaying access of the funds for the child in question. Not to mention – it may not be a good idea for an 18 year-old to receive a large cash inheritance anyway.
Skip these mistakes and prevent mistakes in the future by conducting an annual review of all your estate planning documents. Get started today by contacting us at firstname.lastname@example.org or 732-521-9455.