Many people have not properly designated beneficiaries for their retirement accounts, their annuities, or their life insurance policies. The problem is that many individuals make mistakes when filling out beneficiary forms, so these important documents are left blank or completed incorrectly. If you want to make sure your loved ones can easily access their inheritance, avoid making these mistakes.
Not Writing a Name on the Form
The first mistake that many people make is often the biggest one. A surprisingly high number of individuals forget to name a beneficiary at all. Do not assume that the organization will just pay the funds to your spouse or other close relatives. Different companies have different rules about how to distribute funds without a named beneficiary. Some may just give the funds to your probate estate, while others may give it to your spouse.
There are all sorts of problems with leaving the forms blank and just relying on the company to sort it out for you later. First, it can make it impossible for your preferred heir to get the funds. Another issue is that it can delay the paying out of your estate, making it harder for those you care about to receive funds promptly. In some cases, this mistake can also cause income tax problems.
Accidentally Writing the Wrong Name
Making this mistake is easier than you think. Of course, most people will not write the wrong name entirely, but they may misspell the names, write nicknames, or mix up a senior and a junior in the family. Furthermore, there is the possibility of a person’s name changing after a marriage or a divorce. Many families have similar names, so it can be easy to write the wrong nickname or name variant as well.
These sorts of errors are usually not enough to disinherit your planned beneficiary. However, if the name on the beneficiary designation form does not precisely match your beneficiary’s legal name, it can cause problems. At best, it may just delay a person’s ability to claim his or her inheritance. In worst-case scenarios, accidentally writing the wrong name can lead to two people in the family with similar names each hiring an estate planning attorney and engaging in a lengthy legal battle.
Not Making Plans for Unusual Circumstances
Just writing a name down on your beneficiary form isn’t always enough to completely settle your New Jersey estate plan. There are all sorts of special circumstances that you will also need to consider. If your beneficiary is a minor or otherwise unable to take care of his or her own assets, he or she will need a guardian. It may be a good idea to consult with an estate planning lawyer and set up a trust as your beneficiary, so the person can get more help with his or her finances.
It is also important to consider that your beneficiary may change. This person may predecease you, or your relationship with him or her may change over time. Updating your beneficiary documents regularly can keep this from being a problem, and they should be reviewed at least once a year. You may also want to designate secondary beneficiaries. You can set this up so that your assets go to your preferred second choice if the first one passes away before you.
Ultimately, there are all sorts of unusual situations, so it can be a good idea to talk to a lawyer. Having an experienced estate planning lawyer on your side can help you avoid making major mistakes. At The Knee Law Firm, we are happy to discuss your plans and alert you to any potential roadblocks. Our team can assist you with wills, living trusts and various other estate planning documents. If you would like to schedule a consultation with our Hackensack attorneys, call (201) 996-1200, or fill out our online contact form now.