Your beneficiaries receive benefits from assets such as life insurance and retirement accounts. You’re responsible for naming your beneficiaries and providing the correct information. Here are some common mistakes that Texas residents should avoid regarding beneficiaries.
Failing to update your beneficiary designations
You might change your mind about one or more of your beneficiaries. For example, you might get a divorce and no longer want your ex-spouse on your life insurance, or you might welcome a new grandchild. If a change occurs, the paperwork should reflect the change.
Not choosing a beneficiary
You might skip choosing a beneficiary. Perhaps you want more time to consider your choices or figure you’ll do the paperwork later. But things happen, and you might not get a chance to go back and choose a beneficiary. If you skip this step during estate planning, someone else will decide who receives your assets.
Providing incorrect information
It’s important to provide accurate information on any beneficiary designation forms you fill out. Multiple people in your family could have the same name. Forms must specify who you’re choosing as a beneficiary. Take name changes into account as well. If there’s confusion about who you’ve chosen, it could result in payout delays or litigation.
Failing to consider special circumstances
You may have a beneficiary who shouldn’t have direct access to an asset. People who fall into this category can include children, those with special needs or anyone with a history of bad money management. If you have a legal or financial advisor, you might want to discuss this issue with them.
The importance of beneficiary designations
Choosing one or more beneficiaries gives you control over who receives your assets. Keeping accurate and updated beneficiary designations reduces the risk of mistakes.