J. Kelly Kennedy, Attorney/CPA, PLLC

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Attorney and CPA

Planning can help avoid mistakes when choosing beneficiaries

Setting up a will, trust or any other estate planning instrument involves a variety of legal nuances and technicalities. But most of all, when people in Polk County are trying to plan for the distribution of their assets, they should have some kind of overall idea of their particular goals. A probate and estate administration attorney can then help the person put their goals on paper and set up the necessary trust instruments or other legal vehicles to carry out those goals.

One of the most important aspects of trust administration, or estate planning in general, is choosing and updating appropriate beneficiaries. Surprisingly, however, a variety of mistakes could be made when a person is choosing the beneficiaries who will ultimately received their assets.

Some common and more costly mistakes include having an out-of-date beneficiary, failing to name contingent beneficiaries and naming a minor as a direct beneficiary.

As a person's life circumstances change, so too should their beneficiaries. If, for example a person divorces from their spouse, that person would probably want to change any trusts or other estate planning instruments to exclude the ex-spouse. While this sounds easy enough, many people simply forget to do it.

Not naming a contingent beneficiary is another easy mistake that a person can make when it comes to their estates. Life does not always unfold as expected, and the original beneficiaries that a person names may not end up surviving that person. Thus, it is best to have a backup or contingent beneficiary who will collect the proceeds of an estate in case something should happen to the initial beneficiary.

In addition to avoiding those two mistakes, when naming a beneficiary, a person may not want to make a minor child the direct beneficiary of their estate. People can set up different kinds of trusts to ensure that the minor child is taken care of and will not foolishly fritter away all of the estate's assets. Naming a responsible trustee is, of course, an important step in that process.

Beneficiaries go hand-in-hand with setting up an estate plan. But a person needs to do more than just pick out who they want to get their assets. Careful planning and proper estate and trust administration can be the key to ensuring that a person achieves their goals when distributing their assets.

Source: The Courier, "Five beneficiary traps and the best ways to avoid them," Oct. 9, 2015

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