You can create beneficiary designations for retirement accounts and control the distribution of these and similar assets following your death.
However, mistakes happen. Here are four errors to avoid in dealing with beneficiary designations.
Failing to name a beneficiary
Some people do not realize they can name beneficiaries for life insurance policies, annuities or retirement accounts such as an IRA or 401(k). You need only complete a form with the name of your beneficiary and submit it to the company that holds the asset.
Naming the wrong beneficiary
Make sure you fill out the beneficiary designation form properly. This means double-checking that the beneficiary name is correct: for example, not John Smith but rather John Smith, Jr.
Not taking special circumstances into account
Some beneficiaries should not receive assets directly. Examples are minors, people who have creditor issues or people who cannot manage assets correctly. Loved ones with special needs cannot claim assets that would jeopardize the receipt of their government benefits.
Not updating beneficiary designations
Just as you revisit your will and other estate planning tools from time to time, you should also update your beneficiary designations according to the changes that occur in your life and in the lives of your intended heirs. If you should die without making the appropriate changes, distribution issues could arise.
Seek professional guidance
Stay on top of responsibilities like making error-free beneficiary designations by seeking legal and financial guidance when necessary. Maintain control over your assets by managing who will receive those assets when you are gone.