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Avoiding common pitfalls when choosing beneficiaries

On Behalf of | Nov 3, 2022 | Estate Planning

A common misconception is the notion that the disposition of assets upon the death of an Oklahoma resident is always governed by a will. The fact of the matter is that a number of assets instead are transferred by virtue of pre-existing beneficiary designations. As such, making sound choices when it comes to determining who will receive particular parts of an estate in this way is critical.

Beneficiary designations for key assets

While it is certainly true that wills and trusts play an important role in carrying out a decedent’s final wishes, a significant list of assets will instead pass to pre-determined beneficiaries, including:

  • Retirement accounts
  • Life insurance
  • Annuities
  • “Pay on death” or “transfer on death” accounts

The process of declaring a beneficiary may seem simple upon first glance, but there are risks and pitfalls that must be avoided in order to guarantee proper distribution of assets upon death pursuant to a broader estate plan.

Common beneficiary errors to avoid

The most obvious mistake when it comes to beneficiaries is failing to name one at all. Neglecting this simple yet crucial task can result in an asset being paid to the decedent’s probate estate, something which can bring undesirable tax consequences, not to mention undue delay.

Other missteps for which to watch are things such as naming as a beneficiary a minor individual unable to claim the asset at issue, or choosing someone with a disability or other issue that might prevent competent, direct management of any asset received.

It is important to undertake ongoing, regular reviews of precisely who is named as a beneficiary on various accounts in order to make certain that any changed circumstances or altered familial relationships are fully reflected in these all-important selections. By paying proper attention to the choice of beneficiaries on major assets, it is possible to boost the chances that the overall goals and objectives of a thoughtfully crafted estate plan are indeed met.