The Number One Estate Planning Mistake

Some of your assets cannot be passed on to your heirs through your Last Will and Testament. Instead, some assets are passed on to a beneficiary who you designate under the terms of the agreement with the financial institution. For example, bank accounts, brokerage accounts, retirement plans, annuities and life insurance policies.

(Photo credit: Ken_Mayer)

A recent article explains that forgetting to update your beneficiary designation form is the number one mistake in estate planning.  This mistake commonly occurs when a person improperly tries to include one of the above listed assets in their Will, instead of updating the listed beneficiary. For example, if you list a payable-on-death beneficiary for your bank account, your Will does not change who receives the proceedings for that account when you pass away. The person you listed as the beneficiary of the account would probably receive this asset. The person whom you attempted to give the funds to in your Will probably gets nothing. This also exposes your estate to potential litigation.

Fortunately, the solution to this problem is simple – update your beneficiary forms. It is a good idea to review your listed beneficiaries every year to make sure the person you selected is still the person who should get the asset when you die. It is also a good idea to list a secondary or contingent beneficiary, in case the primary beneficiary should pass away before you do. If you need the recommendation of an experienced financial advisor to assist you, please call our office.