The ideal estate plan includes a comprehensive review of the titles and designated beneficiaries for all assets. Poor estate planning can lead to years of legal battles and red tape among heirs. Among the most common circumstances in which estate plans go wrong concerns the way beneficiaries are designated.
As an experienced South Florida Law Firm in probate, estate planning, and wealth management, Bauer Brofsky Law has seen its fair share of mistakes and here are some of the top mistakes to avoid to ensure a smooth and hassle-free probate process for all involved.
Failing to Name a Beneficiary
If you fail to name a beneficiary of your assets, such as for a life insurance policy, those assets will likely have to go through probate upon your death. The probate fees in Florida can be as high as 3% of the estate. For certain kinds of assets, such as retirement plans, you may also end up with a higher tax burden. Even in the event that your estate is the beneficiary, this should still be noted in the beneficiary designation form. You should also review the default beneficiaries that are often designated by holding companies which handle your assets; sometimes, the default may not square with your own estate plans.
Not Being Up-to-Date With Beneficiary Designations
In the event that a beneficiary predeceases you, or if they are no longer preferred as beneficiaries (such as a divorced spouse), you should immediately review and update your estate plan to account for these changes. Anyone still named as your beneficiary upon your death will most likely receive the designated assets directly by the holding company, regardless of your changed marital status with that individual.
Naming Minors as Direct Beneficiaries
It is understandable for parents to want to safeguard their children in the event of an untimely death and provide them with a trust. But regardless of your will’s provisions, any minor named as a direct beneficiary of your insurance policy or retirement plan will almost certainly be paid out to your child as soon as he or she reaches legal adulthood (18 years). It is typical for such young heirs to spend all of their inheritance within two years, and usually not in the best way. Rather than entrust a young adult with such a large sum of money, consider using a revocable trust with a trustee designation who can properly manage the assets of the trust, while making sure the beneficiary has access to the estate assets without unfettered control.
Failing to Scrutinize Named Beneficiaries
When planning your estate, be extra careful about whom you designate as beneficiaries. For example, naming an individual with special needs – namely one who requires medical assistance or social security – could unintentionally prohibit them from receiving valuable government assistance. Loved ones with a history of financial irresponsibility or impropriety – such as those with a gambling or drug addiction – could find their bad habits fueled further, or their assets claimed by creditors following bankruptcy.
Naming Multiple Beneficiaries on an Enhanced Life Estate Deed
Also known as a “Lady Bird deed”, this type of deed allows one or more beneficiaries to inherit any real estate outside of the probate process upon your death. Though you have the option to designate multiple beneficiaries, this is not advised, as it can lead to family disputes; with more than one person owning a single piece of real estate, it is difficult to get unanimity on selecting a realtor, setting a price, contributing to maintenance in the meantime, and so on. It is best to avoid such conflict by allowing the property to go through an organized probate proceeding or trust administration where either a trusted personal representative or trustee will be able to properly manage and control the assets on behalf of the beneficiaries.
These are just a few of the many issues to look out for when planning your estate. For trusted and professional guidance in this vital matter, turn to David Bauer of Bauer Brofsky Law Firm, one of the best South Florida Law Firms. As a leading specialist in South Florida Probate Administration, asset protection, estate planning, custom wealth management solutions, and more, Mr. Bauer can provide you with steadfast advice and expertise. For more information, please contact us at (305) 712-7979 or email@example.com.