Beneficiary Designation Mistakes – How to Avoid Them
Beneficiaries are some of the biggest reasons to start learning about estate planning law. Leaving what you can’t take with you can be a huge event. Though, that isn’t to say this will be an easy task or that you’ll get everything right the first time. This article is meant to help you do it right the first time.
You may already be well aware that it’s wise to name at least one beneficiary whenever you’re dealing with your estate. That’s true, but there’s more to that and if you keep reading, you’ll find out why naming someone is so important. Probate isn’t for everyone. So, for those of you looking to help your family and friends avoid it as much as possible, consider the following mistakes and try to avoid making them.
Must Have Beneficiary Designations
To help you get a rough idea of what ways you can designate property to someone else, let’s look at seven different options.
As a side note, there are technically eight here, if you count living and revocable trusts as different choices. That said, the list includes beneficiary designations, estate, individual name, payable on death, transfer on death, estate, and living/revocable trusts. Though not all of these options might be available to you depending on the circumstances, if you’re looking to pass something onto someone else, you should consider each one.
The big mistake you need to avoid here is not naming anyone. Yes, there are advantages to each option, but if you’re trying to make sure that something actually passes to someone else, you should pick one option and name another party.
Joint tenancy is a great option when you want the surviving owners to get your portions once you’ve passed. Both living and revocable trusts, as another example, can be used to transfer assets privately.
Making Direct Beneficiary Designations
Throwing free money at people usually sounds good on paper.
However, in theory and life, it doesn’t always turn out so candy sweet. You’ve probably heard finical gurus talk about being smart with money and it may be wise to be smart with your money even when you’re giving it away. It’s possible that by directly giving money someone with special needs, you could unintentionally cause them to lose government assistance. Working around the system is a key part to successful estate planning.
There’s also the issue concerning minors and guardianship. It’s very possible that the court will have to appoint a conservator just because you left money for someone under the age of eighteen.
Again, your good intentions don’t matter. It’s far better to look into trusts, for instance, and see how to ensure that the money is taken care of properly. Conservators can be good, but they aren’t the only option. And that’s not even getting into how trusts can help beneficiaries who have trouble managing money on their own.
Squandered on Probate
Probate might as well be a warning sign to you if you’re looking to give the most out of an estate. Distributions can be made to an estate and that’s not an illegitimate option.
The whole concern may be that taxes can do more harm than good to your remaining assets. It’s far better to simply name someone as a beneficiary whether or not they’re your spouse because tax laws aren’t always made with you and your circumstances in mind.
To be honest, a lot of what you need to be concerned about involve either taxes, probate, and avoiding both of those as much as possible. That’s why some folks prefer to have the assets, whether it was named to a beneficiary or not, distributed in one of two ways.
Some assets can be taken out in lump sums which are taxed when taken out or within a span of five years after the deceased has passed. The latter option allows the assets to be taxed when they are distributed as well.
Forgetting the Beneficiaries
What happens before you pass is up to you. What relationships you maintain and those that get lost in the passing days are what they are. Relationship talk aside, who you name as your beneficiary is not dependent on who was in your inner circle and who was kicked out for a particular reason.
You may or may not be aware that a conservator, via permission of the court, can change who your beneficiaries are. However, it’s best for you to keep things updated as much as possible. It would be unfortunate if someone you wanted to inherit your assets didn’t inherit them because they went to someone you had previously named as a beneficiary.
Consider your spouse, consider your offspring, consider your best friend, or consider anyone. Sure, you may have already named someone which is a step in the right direction. Let’s take, nonetheless, a step back a bit.
Ask yourself if anything has changed. Marriages, someone passing, grandchildren, great grandchildren, or great great great grandchildren are all things that may make you want to update things. Even if you named your spouse, you should look into changing things when they pass since you outlived them.
Minnesota Beneficiary Designation Lawyers
Naming beneficiaries isn’t always the hard part. It’s making sure that it’s done in the right manner and that you’re setting things up things properly.
Just because you want someone to have something doesn’t mean that there won’t be ramifications. Maximizing the good and minimizing the bad are what you should be aiming for. Think of this as the gift wrapping for whatever gifts that you have in mind, preparing and sealing it for the future surprise.
Whenever you have concerns about naming beneficiaries, consider speaking to the Flanders Law Firm LLC. Call: 612-424-0398.
They can give you a better idea of what might need to be done about the situation and answer other questions concerning estate planning law.
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