In the estate planning process, designating beneficiaries is the process of determining which parties will receive an asset or benefit from your estate following your death. Beneficiaries typically receive either monetary payouts or valuable items.
If you are beginning the process of developing an estate plan, designating your beneficiaries is one of the most important steps. An experienced attorney could assist you with beneficiary designations in Houston estate planning.
Designations Beyond Wills and Trusts
The most commonly used estate planning tools are wills and trusts. Most discussion of beneficiaries centers around these tools, but it is worth noting that many other planning options require beneficiaries to be designated as well.
One common example is a life insurance policy. While life insurance might not immediately come to mind to some people when considering estate planning options, these policies will pay benefits much faster than with probate. Other instruments that could require beneficiary designations included commercial annuities and retirement plans.
Conflicts with Beneficiary Designations
The process for designating beneficiaries for an estate plan can be complex. There are potential pitfalls that could come with carelessly designating a beneficiary, and the repercussions can be significant.
Conflicts Between Trusts, Wills, and Other Documents
One of the biggest pitfalls that can occur during beneficiary designation involves a conflict between the estate planning documents and language in a deed for real property. If a deed lists a different beneficiary compared to a will or trust, the deed language will take priority.
Deeds are not the only document where these conflicts could be problematic. Payable on death (POD) accounts can also override the language in a will. Even if a will indicates the funds should be transferred to a specific beneficiary, a conflicting POD account will override the beneficiary language in the will.
Failure to Update Beneficiaries
Another potential issue involves the failure to maintain updated beneficiary designations in estate planning documents. These designations should be updated routinely over time, as circumstances can change in a person’s life. Updating beneficiary information is an important step toward ensuring a person’s estate plan upholds their final wishes.
Updating beneficiary information could help avoid unwanted consequences following a major life change. Some situations that call for reviewing beneficiary information include the birth or death of spouses or children. Divorces and marriages are other events that could require an update to beneficiary information.
Beneficiaries Receiving Disability Benefits
There is more that goes into designating a beneficiary than determining which relative should receive assets through a will or trust. If a prospective beneficiary is currently receiving government benefits, receiving inheritance through a will or trust could increase the beneficiaries’ income to the point they no longer qualify for government benefits.
Talk to an Attorney About Beneficiary Designations in Houston Estate Planning
It is not enough to select the beneficiaries for your will or trust and assume your final wishes will be respected. Beneficiary designations require careful planning and regular updates.
Designating the appropriate beneficiaries is only one part of the estate planning process. To ensure your rights are protected and your final wishes are adhered to, contact an attorney as soon as possible.