Designating beneficiaries seems pretty straightforward. At its core, it is simply the listing of individuals to whom you intend to pass your property and assets. Unfortunately, mistakes involving the designation of beneficiaries are one of the most common that I see. To help my clients avoid this sort of error, I ask my clients hard questions and then help them work towards protecting themselves, their loved ones, and their assets for the future. If you have questions about naming beneficiaries or any other area of estate planning, call experienced San Jose attorney Linda J. MacKay today at 408-379-9600.
Mistakes Involving the Designation of Beneficiaries
A beneficiary is merely a person whom you wish to give something to after you die. You are probably aware of the dramatic act of “writing someone out of your will,” as it is an exciting plotline in television and movies. It is dramatic because it is a final, absolute exclusion of a person from your last act of generosity. Because of that very negative connotation, you can imagine the pain it causes, especially when it is inadvertent. That is the sort of mistake you must avoid in the estate planning process; below is a list of common mistakes that I see.
Failure to Update Beneficiary Lists—Clients sometimes believe that they are done once they have gone through the estate planning process. That misperception can result in the sort of inadvertent pain I mentioned above. Imagine you give each grandchild a parcel of land from your family’s farm, naming each grandchild when you create your will. However, if you never review that will again, you will exclude younger grandchildren who were born after the will was drafted.
The inverse can also be a problem. For example, imagine that you leave some of your favorite jewelry to a daughter-in-law in your will. If she and your son later divorce, you may want that jewelry to go to a granddaughter instead. If you fail to update your will, the jewelry will go to the former daughter-in-law whether you want it to or not.
The inadvertent exclusions and inclusions mentioned above were not your intention but will be the painful effect of failing to update your will every few years. There are several easy solutions to these problems, the most straightforward being to update your will periodically, adding and subtracting beneficiaries as they enter and leave your family. Another solution to the land issue above is to give the land to your grandchildren in a trust whose beneficiaries are all grandchildren alive at the time of your death.
Minors and Special-Needs Individuals as Beneficiaries—People often go through the estate planning process because they want to provide for younger generations. It may be easy to divide your estate and give an equal share to each beneficiary, but that may be a grave mistake if the beneficiaries are either young children or special-needs individuals.
Because children usually lack the long-term judgment to spend inheritance wisely, it is a better course of action to put their share of inheritance into a trust that will either pay out over time or will pay directly towards a specific designation such as education or a home.
Similarly, special needs individual or a person with disabilities often requires specific and expensive long-term care. If that is true of one or more of your beneficiaries, it may be a wiser course to place their inheritance in a trust with the specific aim of providing them with the housing and medical care they need. Because of the complex laws affecting benefits, you may disqualify them for some aid programs by simply giving them a lump-sum inheritance. An experienced estate planning attorney can help you avoid these pitfalls.
A Single Beneficiary—Some people believe that they will simplify their life by designating one beneficiary, who will then have the duty of distributing your assets equitably. This is a significant mistake for two reasons.
First, if your beneficiary survives you, you are placing a tremendous burden on him or her to anticipate how you would have wanted your assets distributed. This burden is likely to engender great enmity towards this person by siblings and other potential beneficiaries who feel they are due more or less than they will receive.
Second, if your single designee does not survive you, your estate will likely be distributed according to Missouri’s laws of intestacy. That distribution is unlikely to be what you envisioned, defeating the entire point of estate planning.
If You Need Estate Planning Help, Call Linda J. MacKay Today
You need an experienced estate planning attorney to carefully draft your will and trusts and other estate planning tools if you are going to meet your estate planning goals. Attorney MacKay has the experience to help you through these challenges and to guide you around pitfalls that snare people who try to handle these issues alone.