Most people want to leave their belongings and assets to their loved ones after they pass away. Typically, this is done by drafting a will and naming beneficiaries, such as your spouse or children. But did you know that even the most well-formed of people have been known to make mistakes when naming beneficiaries that have created legal problems for their loved ones?
These mistakes can typically be avoided if you have a lawyer look over your will as you get older to make sure that everything is in order. But if you're more of a do-it-yourself person, here are four common mistakes to keep in mind that can create major legal problems for your beneficiaries down the road.
Failing to name more than one beneficiary
Many people just assume that they only need to name one beneficiary for things like insurance policies; but as anyone with financial experience will tell you, this is a bad idea. That's because there is a chance that your beneficiary could predecease you, which can cause a policy to transfer to your estate, opening it up to probate litigation and even creditors' claims.
Not saying anything about your estate plan
Many times, relatives and loved ones get into disputes about the beneficiaries you have named in an estate plan. These disputes can sometimes be avoided though if you make sure to discuss your plans so as to clear the waters before it's too late for you to help.
Assuming your will covers everything
Many people fail to realize that their will does not trump other legal documents that name beneficiaries, such as those named in an insurance policy. Making sure you update these names or discuss these changes with your family is a good way to avoid a legal mess down the road.
Not knowing the specifics of the law
Did you know that naming a special-needs child as a beneficiary could make them ineligible for government assistance? Did you also know that a minor child named as a beneficiary of an insurance policy will not receive these benefits directly? These are things to also consider as they could also create problems.
Keep in mind, these are just a few of the problems you could create for your beneficiaries down the road. Talking to a skilled lawyer though can help make sure you avoid them with your own estate plan.
Source: Life Health Pro, "10 ways to screw up when picking life insurance beneficiaries," Barbara Marquand, Feb. 19, 2015