Avoid These Mistakes When Choosing a Beneficiary

Thinking about the time where we need a beneficiary can make most feel a little queasy. After all, we don't like thinking about the moment when we are no longer here. For some individuals, this can be a difficult choice with multiple children and relatives to care for. For others, this is a simple decision. However, if not done correctly the process itself can be tougher than choosing your beneficiaries in the first place! There are common mistakes you can avoid to ensure your beneficiary or beneficiaries 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 usually 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. I've personally seen families fall apart over simple financial oversight or an accident. Don't allow a silly mistake like not checking your beneficiaries tear your family apart. 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

There is a significant lack of understanding of your options when it comes to choosing a beneficiary. 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. When it comes to dolling out your finances, the options are unlimited. Do not believe that it is so cut and dry. You can customize your beneficiaries as you see fit.


The last and simplest to remedy are storing this information in the proper place. If your beneficiaries can't find your information, they may not know they are entitled to your funds after you pass. If you have an attorney, they should have all of your beneficiary information. If you are married, you and your spouse should decide on a storage location of your pertinent information. If you are single, ensure that you tell a family or friend about your important legal documents. The biggest issue after you pass may be finding all of your records! Remember, if you have funds that have been "unclaimed" it will go to the state. Set one place and let a loved one know where they can find them.

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.