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Beneficiary form mistakes to avoid in Florida

by | Dec 2, 2014 | Heirs & Beneficiaries | 0 comments

An estate plan could fall apart if a beneficiary form is not filled out properly. For instance, failing to update a beneficiary form could result in a first spouse or deceased relative receiving assets. If a beneficiary passes on prior to receiving assets, a judge typically has the authority to decide who gets the asset. Generally, these documents supersede any other estate planning document, which makes it important to revise the provisions when necessary.

Another mistake is assuming that a having a will is sufficient to ensure that assets go where they are intended to go. Most people are unaware that a beneficiary form trumps those documents. In some cases, failing to name a beneficiary at all could expose the estate to a potential tax liability.

By failing to name a beneficiary on an IRA account, it may be included in probate. By naming a beneficiary, that IRA could grow tax-free during the life of the beneficiary. Such an IRA is referred to a stretch IRA. One common mistake that can be easily avoided is naming a child as a beneficiary. Because they are limited to what they can receive, it may be better to put money in a trust until the children are older.

Discussing estate planning early and keeping documents updated can be important for the execution of an estate. Talking with an estate planning attorney may make it possible to create a plan that reduces estate taxes and allows for the efficient transfer of assets from generation to generation. Proper planning now may enable an estate to be settled quickly and with limited exposure to taxes and fees.

Source: The Motley Fool, “Top 5 Beneficiary-Form Boo-Boos“, Dayana Yochim, November 24, 2014