January 27, 2015

Too often, the process of naming a beneficiary gets overlooked as the “easy part” of estate planning, but this also means that many mistakes can lead to problems down the line. Here is part one of the most common mistakes made in the process of naming a beneficiary. Tune in tomorrow for another post on the same topic! 

Mistake #1 : Not Reviewing Them Often Enough

Naming a beneficiary is not a “one and done” process. Don’t make the mistake of skipping an annual review. You might find out that now-estranged or deceased individuals are on your beneficiary designation. You may also discover that your needs have changed and a new beneficiary needs to be included.

Mistake #2: Failing to Plan for Special Needs

Even if you have the best of intentions, it’s possible to miss out on planning that is aligned with those who have special needs. Naming an individual with special needs on a life insurance policy might seem like a good idea, but it could actually disqualify the beneficiary from other government benefits. Make sure you do your homework before making this mistake.

Mistake #3: Naming an Individual As a Business-Owned Policy Beneficiary

It’s quite common for a business to get life insurance on key employees or owners, but naming a family member or members as the beneficiary to the policy is not wise. The proceeds can be considered taxable income to the beneficiary either as dividends or ordinary income. The beneficiary on policies of this type should always be the business, not an individual.

Thinking it’s time for a beneficiary review? Set up a meeting today to walk through all your policies and documents and ensure they have the correct details inside. Schedule an appointment through info@lawesq.net.