One common error that people make when dealing with their estate plan is to not update their beneficiary designations. This mistake is probably quite common because many are not aware that a will’s named beneficiaries may be overridden if beneficiary designations are different on insurance plans and retirement accounts.
As a result, even if someone updates their will, if they do not change their designation in the account paperwork itself, the assets will go to whomever is named on the paperwork. While this is not always as big a deal if an individual wanted their assets to go to a child and it goes to a parent instead, it can create a variety of problems if the assets go to an ex-spouse.
Therefore, when people’s circumstances change, due to a divorce, a marriage or a death, it is important that they ensure that all of their estate planning paperwork is updated. Individuals should be aware that a will does not necessarily override all other documents and designations, so it is important that someone ensure that all beneficiary designations are changed. Failure to do so can result in people expecting an inheritance and seeing another individual get it.
Along with ensuring that estate plans are kept current, it is important that people choose the right documents based on their situation. While wills can take care of assigning an individual’s assets to their heirs, there may be fewer tax implications if someone uses a trust to leave property to beneficiaries. A lawyer may be able to assist someone in determining the best estate planning documents based on their situation.