One of the most common goals presented by clients visiting our office is to avoid probate. While it is certainly important to consider how probate could cause further difficulties for your loved ones, and while there are many benefits to generally avoiding probate, there are also unintended consequences of using this as the only factor in determining who to name as a beneficiary on a life insurance policy or a retirement account.
Some of the most common unintended consequences include unintentional beneficiary exclusion if a significant portion of assets pass directly to beneficiaries, loss of tax saving strategies that could have been implemented with the help of a Pasadena estate planning lawyer, loss of creditor and asset protection management through the form of trust, and estate administration issues such as debts, expenses and taxes associated with the administration of that estate.
If you list someone as the sole recipient of your retirement account, they might not have the financial counsel to help them determine what distributions, if any, must be taken from that account. Providing additional written instructions with recommendations about how they protect that asset or obtain guidance from outside professionals goes a long way.
Leaving behind a lump sum from a life insurance policy without additional thought can be problematic, too. The receipt of a lump sum doesn’t necessarily mean your loved one will invest this money or spend it in the way that you intended. Deciding who to pass this amount to based on their overall financial knowledge and ability to manage it is key.
To avoid many of the most common complications associated with unintentional beneficiary designation transfers, a Pasadena estate planning law firm should be consulted immediately.