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Pitfalls in naming beneficiaries when making an estate plan

As many residents of Florida know, a proper estate plan is essential to ensuring that assets are distributed properly after death. There are many components to estate planning, including wills, trusts, durable powers of attorney and more. One area of estate planning that sometimes does not get as much thought is the designation of beneficiaries.

Beneficiaries are designated in many kinds of financial planning tools, including trusts, life insurance policies and retirement accounts or death benefit forms. When dealing with these types of tools, it is important to realize that there are mistakes that can be made.

First, Florida residents should make sure to list beneficiaries on all estate planning documents. This is because, in many cases, naming a beneficiary can help avoid having the assets probated with the estate. Often, if a beneficiary is not listed, the assets will go into the estate, where the intended beneficiary does not have as much control.

Second, it is important to ensure that there are contingent beneficiaries listed. This will allow the assets to pass outside of the estate even if the primary beneficiary is dead. Further, if the primary beneficiary does not want to take the assets for tax reasons that beneficiary may have the ability to execute a qualified disclaimer, allowing the contingent beneficiary to get the assets.

Third, it is prudent to make beneficiary designations specific. Otherwise, interpretation of the beneficiary designations might leave out some intended beneficiaries.

Fourth, keeping beneficiary designations up to date and keeping copies of all designation forms is a good idea. The companies that keep the designation can lose them, especially if they merge with another company or sell off assets.

Lastly, everyone making an estate plan should consider the readiness of beneficiaries to receive certain assets. Except with certain types of trusts, a planner often cannot control the amount of money a beneficiary will receive or what can be done with it. It is important that the estate planner be confident the beneficiaries are emotionally prepared for the assets that they will receive.

Estate planning can be a stressful and complicated process. Everyone undertaking it should do everything possible to explore all legal options to make certain that their goals are going to be met.

Source:, "Six costly beneficiary mistakes to avoid," Byron Ellis, Sept. 14, 2013

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