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5 Biggest Mistakes People Make With Beneficiary Designations

Many people assume that a will dictates the recipients of their assets after they expire. However, your assets are transferred through a beneficiary designation, which is the option to fill out a document with the financial company holding the asset and identify who will get the item following your death.

The beneficiary designation applies to assets such as life insurance, annuities, and retirement funds (401(k)s, IRAs, 403bs, and similar accounts). Furthermore, many financial institutions enable you to name beneficiaries on non-retirement accounts known as transfer of death (TOD) or pay on death (POD).

Here are five significant blunders to avoid when dealing with beneficiary designations:

1. Not Having a Strategy

Do you know where you want your assets to go after you die? Your spouse, children or grandkids, favorite charity, or a mix of those above? It would help if you have already carefully decided on this matter prior to making beneficiary designations. 

You should also decide whether you want to make outright payments to the heirs or, in the case of more significant inheritances, place monies in trust to allow for access to the assets over time.

2. Not Naming a Beneficiary

It’s tempting to put off thinking about who your beneficiaries should be, especially when you’re young and well. As a result, some individuals inadvertently forgo designating a beneficiary. The assets are generally paid through probate via your estate when no beneficiary is designated, which may be costly and time-consuming. More significantly, your assets may not wind up in the location you intended.

3. Failing To Correctly Fill Out the Broker’s Designation Form

Beneficiary designations must be submitted to the plan’s administrator. The majority of suppliers have their designation forms. These forms are notoriously simplistic, allowing for the distribution of substantial assets in a matter of lines. As such, it is crucial to include a comprehensive attorney-drafted designation with the provider’s form.

Following completion, it is critical to contact the provider to check that the designation has been approved. We suggest that such affirmation is in writing. Unfortunately, many clients believe they can file their designations independently and frequently fail to do so correctly. 

4. Failure To Designate the Right Beneficiary

Not everybody should be designated directly as a beneficiary. These include minors, those with special needs, and people who cannot handle their assets or have creditor problems. Children will be unable to claim the assets because they lack legal capacity. A court-appointed person (known as a conservator) will be responsible for claiming and managing the money until the youngster reaches 18.

Conservatorships may be expensive, and they need to be reported to the court on an annual basis. In addition, the court frequently requires conservators to submit a bond, which is generally obtained from an insurance company and can be costly.

5. Not Consulting With Proper Advisors on Beneficiary Designations

How beneficiary designations should be completed is part of a comprehensive financial and estate strategy. It’s essential to consult with your legal and financial advisors to evaluate what’s best for your specific circumstance.

Remember that beneficiary designation is intended to give you the final say over who receives your assets after you die. By taking the time to carefully (and accurately) pick your beneficiaries and then revisiting those selections and making any required adjustments regularly, you can keep control of your money. After all, that is what estate planning is all about.


Beneficiary designations should be chosen and reviewed as part of your estate planning. Whether you use a trust or other estate planning techniques, work with a financial advisor to address your priorities effectively.

If you need assistance with handling your federal employee retirement planning, get in touch with My Federal Plan. We offer advisory on retirement planning for federal employees in the US.  Contact us today for a free consultation.

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