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Common errors with beneficiary designations

When Wisconsin residents are creating an estate plan, they might think about wills and trusts and forget about beneficiary designations. These are documents that people sign to name a beneficiary for assets such as a retirement account. Sometimes, they are neglected after life changes.

For example, one woman divorced her husband when her children were young. She updated the beneficiary on her IRA to be her father so he could care for her minor children in the event of her death. Years later, after her children grew up and her father remarried, she moved the IRA to a different investment company and realized she had never removed her father as beneficiary.

Beneficiary designations can pass money more quickly to heirs than a will does because these types of assets do not have to pass through the probate process. However, they should be reviewed regularly to ensure that they remain up to date. Removing a spouse as beneficiary may require that spouse's signature. A charity can also be a beneficiary.

Beneficiary designations override instructions in wills or trusts, and this is another reason it is important that they remain current. A person could end up accidentally leaving significant assets to an ex-spouse. Other changes in a person's assets or a person's relationship with potential beneficiaries could result in the need for a change. An attorney might be able to discuss how a will or trust might fit into the overall estate plan. A trust also bypasses probate, and it can be useful if a person wants to put conditions on when a beneficiary can receive distributions.

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