Avoid These Mistakes When Choosing a Beneficiary

Choosing a beneficiary can be tough. Ensuring that the process goes smoothly after you pass can be even tougher. However, there are common mistakes you can avoid to ensure your beneficiary receives their full benefit. 

Mistake #1 - Set It and Forget It

Many people take the approach of "set it and forget it" when they are establishing beneficiaries. They normally do it one time at the opening of an account such as an IRA or 401k and never look at it again. However, they could have gotten a divorce, had more children, or have fallen out with a loved one. Ideally, you should review your beneficiaries once a year during your annual financial review to ensure all beneficiaries are up to date. 

Mistake #2 - Lack of Uniformity

Another mistake typically made is a lack of uniformity with the beneficiary's information. Maybe your daughter's name is Eleanor but goes by Ella so you have two forms with both names present. This could cause a slow in the beneficiary payout and may force the beneficiary to send in additional documents proving their identity. Keep it simple and make sure all information including birth date, social security numbers, current address, and name are aligned. 

Mistake #3 - Unsure of Options

The last mistake most commonly seen is a lack of understanding of their beneficiary options. Many think that they can only deem one beneficiary or that it has to go to an individual. Both are not true. You can establish your beneficiary as an estate or trust rather than a person so all of your assets are centralized then paid out. You can also have as many beneficiaries as you wish. You can have multiple primary and secondary beneficiaries. 

Final Thoughts:

It can be really uncomfortable thinking about your end of life items like establishing a beneficiary or beneficiaries. However, taking care of your loved ones normally outweighs the fear. Educate yourself on your beneficiary options so you can make the right choice for your family. If you have further questions about establishing your beneficiaries or altering the beneficiaries you currently have don’t hesitate to get in contact! I’m always happy to hear from you.