Choosing a beneficiary for your will or estate may seem like a daunting process, but it does not have to be. To be clear, a beneficiary is an individual (or organization) who receives a piece of your estate when you die. It is possible to have multiple beneficiaries of a will or estate. You can also make the beneficiary whomever you wish: a beneficiary does not have to be a relative.
However, choosing beneficiaries does require some careful forethought. Otherwise, it is possible for your estate to be in probate for years. Make sure not to make these three mistakes when choosing your own.
Mistake #1: Not being specific with who gets what and how much
You may think that stating “my spouse gets everything when I die” is the easiest way to go about creating an estate plan. However, this is a one-way ticket to a nightmarish probate situation. Grief can also be an extremely powerful force: what may not have seemed like a big deal when you were alive (such as who inherits your tool collection) can turn into a nasty fight after your death.
Plus, being specific about who your beneficiaries are can help your heirs get through the probate process quicker. It can even help some parts of your estate avoid probate altogether. Or course, some assets, such as property, will go through probate regardless. However, having a clear beneficiary makes the process a lot speedier. Additionally, while your estate is in probate, this means that your beneficiaries have no access to it. Speeding up probate matters means that your assets get distributed faster to your loved ones.
Mistake #2: Not understanding the difference between primary and contingent beneficiaries
Your primary beneficiary is the first person to receive your assets. You should be very specific about this person: include their current address and all pertinent information. If you want to have more than one primary beneficiary, you should divide your estate up by percentages. This is due to the likelihood of the value of your estate fluctuating between the creation of your estate plan and your death. Contingent beneficiaries are entities that receive your assets if the primary beneficiaries die or nobody can locate them. You must state whether you want to disseminate your estate per stirpes or per capita to your contingent beneficiaries. Per stripes means that your assets will go to your beneficiary's progeny. Per capita means that if a beneficiary dies your estate redistributes amounts to the surviving beneficiaries.
Mistake #3: Not making provisions for minor beneficiaries
If you have young children, it may seem sensible to name them as beneficiaries of your estate. But if you happen to pass away before your children reach the age of majority, this can complicate matters if you do not take special precautions while planning your estate. For instance, it is possible that life insurance will not pay out to your minor beneficiaries until they reach 18. If your children need access to your assets for immediate expenses, this can be frustrating. Setting up a trust is a good way to help ensure your minor children have access to your estate quickly. Contact AmeriEstate today to learn more about estate planning best practices.