January 8, 2021

A beneficiary is the person(s) or entity you wish to inherit your account/assets to when you die. You (the account/asset owner) are responsible for selecting the beneficiary designation.
You can list a primary beneficiary who is the first in line to receive the account or assets. You can also list multiple primary beneficiaries and stipulate how the asset would be allocated.
If the primary beneficiary is no longer alive, a contingent beneficiary, who is second in line, would inherit the account or asset.

Below are the top mistakes most people make:
1. Not naming a beneficiary
Many people fail to name a beneficiary on their retirement accounts. This could be because they are unaware, or they needed to think more on who should receive their assets and forgot to complete the necessary paperwork.
What happens to your account if you forget to name a beneficiary and pass away? It will go to probate and the court will decide who receives the account.
This will create an unnecessary hassle and expense for your heirs.

2. Having an outdated beneficiary
Many have a “set it and forget it” mentality when it comes to naming beneficiaries. The most common mistake we see here is someone who goes through a life event and never updated their beneficiary designations, such as getting a divorce and forgetting to remove their ex-spouse.
This mistake could result in millions of dollars going to unintended beneficiaries. It is important to review your beneficiary information regularly to ensure it is updated, especially after life changing events such as divorce and losing a spouse.

3. Naming a minor as a beneficiary
By law, minors cannot legally receive property until they are adult age. Depending on which state you live in, this could be either age 18 or 21. An adult would need to be appointed as the custodian of the account in the interim.
The custodian is the person who is in charge of withdrawals from the account until the minor reaches age of 18 or 21 for the benefit of the minor.
If you name a minor as a beneficiary and you pass away, the asset will have to go through probate which takes longer and is more expensive to settle your estate.

4. Failing to review beneficiary designations with your attorney and financial advisor
You have worked hard for many years to accumulate assets and build your wealth. Make sure that it would pass down to your heirs the way you wished for. It is important to periodically review the beneficiary designations with your attorney and financial advisor to avoid some of these costly mistakes.
Your attorney and financial advisors will help determine what is best for your specific situation. You have the ultimate say over who will get your accounts when you die. By reviewing your beneficiary designations and making any necessary updates, you will stay in control of your wealth even after you are gone.
That is a great Legacy planning.