If you were to become incapacitated, who would be in control of that money? If we do a proper plan with a trust, or at least a really good power of attorney, we have planned for your incapacity. We can make changes in the event that you become incapacitated, and we can change beneficiaries. We can also move the money into a trust and we can change investments. When people decide to just put the kids names on everything as beneficiary designations, they have lost the ability to control what can be done.

People Forget to Update the Beneficiary Designations

It has often happened that a spouse has beneficiary designated money to the deceased spouse, or there is money that is beneficiary designated to a child who is no longer alive. Sometimes we see cases where a person has beneficiary designated money to a former spouse to whom they have divorced. People can sometimes forget about their assets or that they bought that annuity years previously. When they look at the statement, they recall having signed some paperwork 25 years ago, naming beneficiaries – half of which are now deceased. When people pass away or become incapacitated, you have to change the beneficiary forms because the forms don’t contemplate all these issues. 

With a beneficiary designated asset, there’s not enough contingency planning done. I realize it’s uncomfortable thinking and talking about death and disabilities, but it is also important. I am not a big fan of using beneficiary designations, and I see them as band aids, which don’t solve the real problem. With a good estate plan, you’ve got a fully loaded toolbox and there is every tool you could need. When something breaks, you can’t fix everything with a screwdriver. When you’re talking about your entire life savings, you can’t fix everything with a beneficiary designation. 

Reasons to Use a Beneficiary Designation

There are a few good reasons to use beneficiary designations. When leaving money to nonprofits, it is recommended to use beneficiary designations. The nonprofits don’t need to be involved in the estate administration process. Of course, you can also use beneficiary designations to avoid probate. We encourage you to learn more about the best estate planning tools to use. We will tell you more about this if you come to our 3 Secrets Workshop. Register HERE. 

“It’s better to look ahead and prepare than to look back and regret.”