Putting together your estate plan is one of the most important things you will ever do. An estate plan can consist of a will, power of attorney, medical directive and many other items that protect you, your spouse and your heirs should you become incapacitated and when you die. Let's discuss the mistakes you need to avoid when choosing your beneficiaries.
Never name your estate as your beneficiary for a retirement plan. This will force the estate to go through probate, which could have been avoided if you named an individual or multiple people as your beneficiaries.
Do not name minors as direct beneficiaries of any type of asset or financial account. Should you name a minor as the direct beneficiary of your life insurance policy they will not receive the money until they are 18 or 21. Giving someone a large sum of money at such a young age might not be the best thing for them.
Make sure you name someone as a beneficiary instead of not naming anyone. If you decide to not name anyone as beneficiary, your estate will head to probate. Should you do this with a life insurance policy or a retirement account there could be a default beneficiary chosen, and it might not be who you wish.
Do not name each child the beneficiary of separate accounts. The final amounts of these accounts could differ by the time you pass away. This likely isn't what you intended and it could lead to issues with your children when you are gone.
Choosing beneficiaries is an important part of the estate planning process that should never be overlooked. You need to avoid the mistakes outlined here if you want to ensure that your beneficiaries are taken care of when you are gone.