Beneficiary designations are crucial in Estate Planning, however there are some common mistakes people make when relying on beneficiary designations take over.
Mistakes with Beneficiary Designations
1. The first mistake is when people name their minor children as beneficiaries on accounts.
While this may seem like the perfect step to ensure your children are secure after you’re gone, minors cannot inherit in the state of Colorado. Instead, that money would be held in trust at the court; making it very hard for your children to get access to it until they are 18 years old. Additionally, your 18 year old will be receiving a large lump sum all at once and typically parents do not want their 18 year old to have that much money at such a young age.
2. The second mistake is when people do not update their beneficiary designations after a divorce.
It is quite common to name a spouse as beneficiary on your accounts, but after a divorce, do you still want your ex-spouse to receive those assets? Probably not. It is very important to check your beneficiary designations every couple of years to make sure the people named to receive your assets are still the people you want.
3. The third mistake is when people do not update their beneficiary designations after the death of a beneficiary.
If you name someone as the beneficiary on your accounts and they predecease you, the money could get pulled into probate in order to find someone else to distribute to.
Name a Trust as the Beneficiary
By naming a Trust as the beneficiary on your accounts, your Trust can control exactly how the proceeds will be distributed, including such contingencies. The Trust can also name a person who will manage and distribute the money for minor children or grandchildren.
Schedule a free initial consultation with one of our experienced attorneys to discuss how your beneficiary designations should be set up to ensure your money goes to who you want it to!