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Common Mistakes With Beneficiary Designations In Georgia

Posted by Joel Beck | Jul 09, 2024 | 0 Comments

Estate planning can be a complex and challenging task, and one of the critical aspects of it involves making proper beneficiary designations. At Peach State Wills & Trusts, we often encounter cases where individuals make mistakes with their beneficiary designations, leading to unintended consequences. Let's explore some common errors and how you can avoid them to ensure your estate plan accurately reflects your wishes.


Understanding Beneficiary Designations

Before diving into the common mistakes, it's essential to understand what beneficiary designations are and their purpose. A beneficiary designation is a legal mechanism that directs where specific assets will go upon your death. These designations are commonly used for life insurance policies, retirement accounts (like IRAs and 401(k)s), and sometimes even for bank accounts and investment accounts. When you name a beneficiary, the asset bypasses your will and goes directly to the designated individual, making it a non-probate asset.


Listing an Unintended Beneficiary

One of the most frequent mistakes is listing an unintended beneficiary. For instance, if you intend to leave money to a minor child, you might name an adult, such as a sibling or friend, to manage the funds. However, this approach has significant risks:

  • Loss of Control: Once the money is given to the adult, there is no legal obligation for them to use it for the child's benefit. They could use the funds as they see fit.

  • Creditor Risk: If the named adult faces financial issues, such as debts or lawsuits, your intended child's money could be at risk to satisfy the adult's creditors.


Avoiding Unintended Beneficiaries

To avoid these pitfalls, consider the following:

  • Trusts: Establish a trust to manage the funds for your minor child. This way, the assets are legally protected and can only be used for the child's benefit.
  • Guardianship Provisions: Specify in your will who should manage the funds for your minor child until they reach adulthood.


Not Going Deep Enough

Another common mistake is not naming contingent beneficiaries. If your primary beneficiary predeceases you or dies simultaneously with you, the asset distribution becomes complicated and may not align with your wishes.


Naming Contingent Beneficiaries

Ensure you have a backup plan by:

  • Primary and Secondary Beneficiaries: Always name at least one contingent beneficiary who will receive the assets if the primary beneficiary is unavailable.

  • Regular Updates: Review and update your beneficiary designations periodically to reflect any changes in your relationships or circumstances.


Failing to Update After Life Changes

Life events such as divorce, marriage, or the birth of a child necessitate updating your beneficiary designations. Unfortunately, many people overlook this crucial step, leading to outdated designations that do not reflect their current wishes.


Keeping Beneficiaries Updated

To keep your estate plan current:


  • Regular Reviews: Make it a habit to review your beneficiary designations annually or after significant life events.

  • Immediate Changes: Update your designations immediately following a major life change, such as a divorce, to ensure your assets go to the intended individuals.

Lack of Coordination with Estate Plan

A lack of coordination between your beneficiary designations and your overall estate plan can lead to unintended consequences. For example, if your will specifies one distribution plan but your beneficiary designations state another, the designations will take precedence, potentially undermining your estate plan.


Ensuring Coordination

To ensure your beneficiary designations align with your estate plan:

  • Consistent Planning: Ensure that your beneficiary designations are consistent with the provisions in your will and trust.

  • Professional Advice: Work with an estate planning attorney to coordinate all aspects of your estate plan, including beneficiary designations.


Practical Tips for Managing Beneficiary Designations

Proper management of beneficiary designations involves several practical steps to avoid common mistakes and ensure your assets are distributed according to your wishes:


  • Detailed Documentation: Keep detailed records of all your beneficiary designations and the rationale behind them.

  • Periodic Reviews: Regularly review and update your designations, especially after significant life changes.

  • Professional Guidance: Consult with an estate planning attorney to ensure your designations are legally sound and aligned with your overall estate plan.


Contact Peach State Wills & Trusts 

Beneficiary designations play a crucial role in your estate plan, and making mistakes in this area can have significant repercussions. At Peach State Wills & Trusts, we understand the intricacies of estate planning and are here to help you undergo these complexities. By avoiding common mistakes and ensuring your beneficiary designations are accurate and up-to-date, you can achieve peace of mind knowing your assets will be distributed according to your wishes.

Contact Peach State Wills & Trusts at 678-344-5342 or online to learn how to plan for your estate in Georgia today. If you have any questions about estate planning in Georgia, you can download our free guide here, no strings attached. We are committed to providing friendly, professional, and approachable legal services to help you with all your estate planning needs.

About the Author

Joel Beck

Joel Beck founded The Beck Law Firm, LLC in 2007. His firm focused on business law and estate planning needs of clients, two areas that he was drawn to based upon personal and business experiences in his life, including a ten-year career at NASD (now known as FINRA).


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