A beneficiary designation gives you the power to transfer your assets straight to your intended inheritor. All you have to do in this process is complete a form and file it with the financial company that holds the asset. In this form, you also designate the person to who the asset goes once you pass away. But there are some common mistakes that people make in this process, so make sure to take a closer look at your beneficiary designation in Texas.
What your will doesn’t do
It’s a common misconception that your will controls where your assets go once you’ve passed away. But often, your estate will include assets that are transferred via beneficiary designation.
Common examples of assets passed through beneficiary designation include annuities, life insurance and retirement accounts. This applies to IRAs, 401(k)s and 403(b)s along with similar types of accounts.
Depending on your financial institution, you might have the option to designate beneficiaries for accounts other than those for retirement. These are called either POD or TOD accounts, which means pay on death or transfer on death, respectively.
Name a beneficiary for life insurance and retirement accounts
One of the most basic mistakes people make is when they forget to name any beneficiaries. Sometimes it’s because they aren’t aware that the option to appoint a beneficiary exists for life insurance or retirement accounts, or it may be that they put off this estate planning step until it was too late.
Failure to designate a beneficiary for these types of accounts means that your financial institution gets to use its policies for what to do with your assets once you’ve passed away. Most of the time, with life insurance, this means the assets go to your probate estate. Bear in mind that this will put your family through the tedious and expensive process in which they must hire a lawyer and go to court to probate the estate and finally claim the proceeds.
Beneficiary designation blunders can be costly, and those costs tend to add up at the worst possible time quickly. To avoid these estate planning mistakes, it helps to know what they are.