Those who make a point of including all of their most valuable assets in a will or trust can reduce the likelihood of loved ones fighting when they die. Occasionally, testators need to revisit their estate plans to remove liquidated assets, add new beneficiaries or otherwise adjust their documents to reflect their current financial and familial circumstances.
The revision process can sometimes lead to mistakes that alter the effectiveness of an estate plan. For example, there are three assets that people often manage improperly when making updates to estate planning paperwork.
Life insurance proceeds
One of the most common mistakes individuals make relates to the selection of a beneficiary for their life insurance. Whether someone buys a policy from an insurance broker or has coverage offered as a benefit through their employer, the party they name is the beneficiary will receive a payout if they die while the policy is active. However, people cannot simply name a beneficiary for that policy in their will or trust documents. They will need to actually file a new beneficiary designation paperwork with the insurance company to ensure that their newly chosen beneficiary will be the one that receives the money from the policy.
Real property
People sometimes fail to consider what a shared ownership interest in real property could mean for their estate plan. If they don’t correct their vesting or include the right language in their estate plans, it may be very difficult to ensure that the right parties receive their interest in the property when they die. All too often, people simply add a line or two to their wills instead of reviewing how they hold title, executing new deeds and carefully addressing the real property in their estate planning paperwork.
Financial accounts
People can include their financial accounts in a will, but that generally means that those resources will be part of their estate. They could therefore end up subject to taxes or creditor claims depending on someone’s circumstances. Many people would prefer to keep their financial assets out of probate court whenever possible, which might mean using a transfer on death designation filed with the financial institution or brokerage. If people do not update those transfer-on-death documents to name new beneficiaries, the changes they make to a will could have very little impact on what happens with that account after they pass.
Learning about assets that often become stumbling blocks during probate proceedings because of mistakes when updating estate plans can help people better address those resources when making revisions to their testamentary documents.
