Keep these tips in mind for beneficiary designations

On Behalf of | Jun 6, 2022 | Estate Planning |

One big mistake that people in California may make in their estate plan is carefully preparing a will or trust but neglecting their beneficiary designations. It can be easy to overlook these documents, but since they usually override wills and trusts, it is important to make sure that they remain up to date.

Beneficiary designation forms

You may use beneficiary designations if you have a retirement account or a life insurance policy, but other assets may be passed by beneficiary designation as well. You should read the instructions on the forms carefully even if you’ve filled out similar forms before. If you do not complete these forms, the assets might have to go through probate.

Review regularly

It is important to think about the beneficiary designation in terms of how it fits in with the rest of your estate plan. Pay attention to whether the value of assets passed by beneficiary changes over the years because you may want to make adjustments if you want some or all of your beneficiaries to get roughly similar amounts. After any major changes in your family, including marriage, birth, death and divorce, review your beneficiary designations and the rest of your estate plan.

Taxes and trusts

There are a number of other issues to consider with a beneficiary designation, such as tax implications, and a financial professional may be able to advise you based on your specific situation. For example, in some cases, it might be advantageous to name a trust as beneficiary.

Beneficiary designations can be an excellent tool for passing assets because those assets can go directly to heirs instead of having to go through probate first. However, it is critical to consider beneficiary needs and your current family configuration as you make or update these arrangements.