People can make mistakes when estate planning. Moreover, when such errors occur, probate litigation can follow. It is costly and can permanently damage good relationships among heirs.
Many residents of Kennett Square, Pennsylvania, especially those who plan to leave a legacy, must ensure that beneficiary designations are correct before it is too late. Once a person has signed a will, he or she may feel that the estate plan and its beneficiaries are complete. However, some assets cannot be covered by a will, such as IRAs and other benefit plans. Reviewing the overall estate plan for completeness is the soundest course of action.
Designating a beneficiary of a benefit plan only in a will can cause havoc. A will cannot supersede the assignment of beneficiaries to an IRA, retirement accounts, life insurance policies, employer-sponsored retirement plans, annuities and other beneficiary-assigned plans. Hence, an out-of-date estate plan can result in probate litigation, which is likely to create tension among surviving family members and potential dissension. Unless beneficiaries are updated to match the will, the designation in the will is useless.
Reviewing beneficiary designations should be done regularly to avoid such gaffes. Changes, such as divorce, remarriage, death or incapacity of a primary beneficiary and new family members are relevant and should be considered when assigning beneficiaries.
A court battle can be expensive and can cause emotional and financial strain on heirs.
Death ends the opportunity for a person to take control of his or her assets, including benefit plans. Although a will can help transfer a legacy with ease, how to easily transfer non-probate assets with the least tax liability should be a goal. An estate planner can assist in reviewing an estate plan and help an estate owner ensure that an incorrect beneficiary designation will not compromise the wishes of the deceased.
Source: Forbes, "The Big Estate-Planning Goof You May Be Making," Harper Willis, Dec. 16, 2013