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Beneficiary designations commonly overlooked by individuals

On Behalf of | Jun 26, 2020 | Estate Planning

Most people have at least a basic understanding of beneficiary designations as they are associated with individual retirement accounts, life insurance policies and 401(k)s, for example. Many investment accounts require that the account holder designate a beneficiary when the account is opened. For people considering their Indiana estate plans, making the right beneficiary designations can help to avoid problems down the line and ensure that assets are distributed to the right people when the account holder dies.

Among the mistakes that people commonly make with beneficiary designations are thinking a will is more powerful than it is, failing to create contingency plans and forgetting about certain accounts. Wills do not take precedent over beneficiary designations. If the life insurance policy designates a certain person as beneficiary, that designation will not be superseded by contrary language in the will. This is because accounts that have contractual designations pass outside of probate and are not governed by the will.

One major contingency that people often fail to account for is the situation in which a designated beneficiary predeceases the account holder. This can lead to problems and stress among friends and loved ones. Another factor is forgetting about important accounts. Sometimes people forget about retirement accounts they had with old jobs and fail to update the beneficiary designations associated with those accounts. It’s not uncommon for an ex-spouse to be named as the beneficiary even though they’ve been divorced for decades.

People in Indiana who have questions about their estate plans might want to schedule a consultation with an attorney. An attorney who has experience in estate planning law may be able to help by reviewing the client’s situation, including any existing wills, trusts and beneficiary accounts. A comprehensive review may help to avoid obvious problems and set the stage for the development of a plan that distributes assets according to the client’s needs and goals.