Remember your beneficiary designations

Many people in Arizona are under the false impression that their last will and testament dictates everything about their estate plan. In fact, beneficiary designations can actually override what’s written in a will.

What are beneficiary designations?

A beneficiary designation is a simple form that is filled out with a financial institution that dictates who should inherit an asset when the account holder dies. You probably have beneficiary designations for your checking, savings and investment accounts, even if you don’t remember signing them. Retirement accounts, 401(k)s and IRAs also have beneficiary designations.

Common mistakes with beneficiary designations

One of the most common mistakes with beneficiary designations is not using them at all. Leaving beneficiary designation forms blank is a missed opportunity for your loved ones to avoid the time and expense of probate court. Since beneficiary designations allow assets to pass directly to beneficiaries, they are a useful estate planning tool.

Another mistake that people make with beneficiary designations is failing to update them. Ten years ago, you may have chosen a loved one who has since passed away or a spouse with who you are now divorced. It’s important to review your beneficiary designations after every major life event.

Consider special circumstances

While beneficiary designations are excellent estate planning tools, it’s important to weigh special circumstances before deciding how to use them. For example, if you have a loved one who is disabled, naming them as a beneficiary on one of your financial assets could cause them to lose access to government benefits. If you have a beneficiary with debt issues, you may not be able to leave them an asset directly since creditors could seize the asset.