Beneficiary designations are incredibly important, but often misunderstood or not understood at all by those who are preparing their wills and planning their estates. Many people believe that a trust will handle the distribution of assets like life insurance, IRAs, retirement plans, annuities, and some employee benefit plans. In fact, these are all controlled by beneficiary designations. Understanding how to properly name beneficiaries, and how to avoid common mistakes in beneficiary designation, is key to ensuring that many of your assets end up where they belong. If you don’t designate the beneficiary who will receive these assets after your death, it’s possible that the assets will be distributed to someone other than who you intended. For example, some custodial agreements will automatically default to the spouse, and if there is no spouse, then to the owner’s surviving children, and then to the estate. This is a helpful default in the case of no beneficiary designations, but doesn’t ensure that your assets go to the person that you would have chosen. Another scenario could result in the account becoming part of a probate estate, which can often result in delayed distributions, greater costs of administration, and income tax regulations that can be less than beneficial. Setting and Updating Beneficiary Designation As a result, it’s incredibly important to not only establish beneficiary designation, but to keep it updated as time goes on. These designations should be regularly updated based on life events, including births, deaths, marriages, divorces, or other changes in the relationships or dynamics of your family and loved ones. Failing to update these designations can result in either assets being distributed to someone you didn’t intend, or failing to be distributed to someone you did intend to include but never got around to including. Common Beneficiary Designation Mistakes Aside from failing to name a beneficiary at all, here are some other here are some more of the most common mistakes to avoid. Naming an estate as beneficiary Naming your estate as the beneficiary may eventually result in your heirs receiving the inheritance you intended, it isn’t the most efficient way to make that happen. It can result in greater tax liabilities, as well as less flexibility when it comes to how and when the assets are distributed. Naming a charity as co-beneficiary When a charity is named as co-beneficiary alongside an individual, that individual could be unable to stretch their payments over the course of their lifetime if they fail to meet a deadline of September 30th of the following year to pay the charity’s full interest in the designation. Naming a trust as beneficiary


While this is possible, it can be much more complex and expensive to draft and update a trust versus a simple beneficiary designation. Amuni Financial, Inc. is a Broker-Dealer and Registered Investment Advisor. Member FINRA/SIPC. Please see our website for the states in which we’re registered to do business.

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