Avoid This Common Estate Planning Error

Because the federal estate tax exemption is now at a generous $5.25 million, many people have put off estate planning as something that has become unnecessary. However, this is when common estate planning mistakes are made. A recent article cautions readers not to make one simple estate planning error.

The error discussed by the article is that of not keeping your beneficiary designations up to date. Some accounts, plans, and policies for which you may have beneficiary designations include bank accounts, brokerage accounts, retirement accounts, company benefits plans, life insurance policies, and 529 plans. If you have these plans, be sure you have a primary and contingent beneficiary selected for each, before it is too late.

In one โ€œhorror story,โ€ a father failed to change his beneficiary designations from his ex wife to his daughter from an earlier marriage. The father didnโ€™t intend for the ex wife to take anything at his death, as she took heavily in the divorce. However, because he failed to update his beneficiary designation, the ex-wife took the proceeds and his daughter was left with nothing.

In order to avoid this fate, be sure to review all of your beneficiary designations. For bank and brokerage firm accounts, complete and submit transfer-on-death or payable-on-death forms. For retirement accounts, 529 college savings plans and similar, fill out and submit beneficiary or beneficiary change forms.

For assistance in reviewing and updating your beneficiary designations, contact us at (626) 696-3145.

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