Individuals in Minnesota who are concerned about the disposition of their estate after they die should keep in mind that there are a number of errors they must beware of regarding beneficiaries. One of the most common is failing to update the beneficiary designation after major life events like births, deaths, remarriages and divorces, but there are many others. Individuals should also remember that writing a will does not fix all of these problems, as beneficiary designations in certain types of financial instruemnts will override what is written in a will.
Other errors may be the result of lesser-known laws. For example, if an IRA does not have a beneficiary named, it must go through probate, and heirs have to forfeit certain tax benefits. Naming minor children as beneficiaries or failing to designate a secondary beneficiary can cause problems as well. If there is no secondary beneficiary and the primary beneficiary has died, the state will decide who receives the inheritance.
There are a number of other considerations. Individuals may accidentally disinherit children from an earlier marriage if they are not specific about jointly owned assets that belong to current spouses. Losing track of paperwork or keeping plans secret can also cause problems. Other errors include making life insurance undergo probate as a result of naming the estate as beneficiary rather than a trust or individual and failing to update documents in a valid way.
Given the complexity of estate planning and the ease with which errors can be made, individuals may wish to work with an attorney who has experience in these matters. It is advisable to periodically review and update the estate plan to ensure that all documents are in order and reflect current circumstances.
Source: The Motley Fool, “Top 5 Beneficiary-Form Boo-Boos“, Dayana Yochim, November 25, 2014