When it comes to estate planning, many people focus on wills and trusts but overlook one crucial element: designating a beneficiary. These forms dictate who inherits assets like retirement accounts, life insurance policies, and payable-on-death (POD) bank accounts.
And here’s the kicker: beneficiary designations override your will.
A single mistake can lead to delays, disputes, or assets going to the wrong person entirely. I’m Bill Syverson, and below, I outline the seven most common mistakes people make and how to avoid them.
Can a Beneficiary Designation Be Challenged?
Yes, a beneficiary designation can be challenged under certain circumstances. Common reasons include allegations of fraud, undue influence, lack of mental capacity, or errors in the documentation.
For example, if someone coerced the account holder into changing the designation, a court may invalidate it. Conflicts may also arise if the designation contradicts a divorce decree or legal agreement.
This is one reason why it’s vital for you to avoid making any mistakes with your designations.
What Should You Keep in Mind When Naming Beneficiaries?
When naming beneficiaries, keep the following 7 mistakes (and how to avoid them) in mind:
- Failing to Name a Beneficiary at All
- Only Listing a Primary Beneficiary
- Outdated Designations After Life Changes
- Naming Minors Without a Trust or Custodian
- Assuming All Assets Work the Same Way
- Using Vague or Ambiguous Terms
- Forgetting to Review Employer or Bank-Specific Forms
1. Failing to Name a Beneficiary at All
The Mistake: Leaving the beneficiary section blank (or assuming your will covers it).
Why is It a Problem? Assets with no designated beneficiary may go through probate, defeating the purpose of making these designations. Worse, they could be distributed according to default rules, not your intentions.
How to Fix It:
- Review all your financial accounts and insurance policies.
- If a beneficiary isn’t listed, update the form right away.
2. Only Listing a Primary Beneficiary
The Mistake: Failing to name a contingent (backup) beneficiary.
Why is It a Problem? If your primary beneficiary dies before you, and you haven’t updated the designation, the asset could be redirected to your estate — and into probate.
How to Fix It:
- Always list at least one (1) contingent beneficiary.
- Review and update these names after major life events.
3. Outdated Designations After Life Changes
The Mistake: Forgetting to update beneficiary forms after marriage, divorce, birth, or death.
Why is It a Problem? Your ex-spouse or a deceased loved one could remain listed as a beneficiary, even if your will says otherwise.
How to Fix It: Schedule an annual beneficiary review.
4. Naming Minors Without a Trust or Custodian
The Mistake: Listing a child or minor as the direct beneficiary.
Why is It a Problem? Minors cannot legally inherit assets. The court will appoint a custodian, which could delay distribution and cost your estate extra fees.
How to Fix It: Work with an estate planning attorney to:
- Establish a trust.
- Name a custodian under the Uniform Transfers to Minors Act (UTMA).
5. Assuming All Assets Work the Same Way
The Mistake: Believing a will or trust controls all asset distributions.
Why is It a Problem? Some assets pass outside of probate and follow beneficiary forms, not your will. These may include your IRAs, 401(k)s, life insurance, and POD/TOD accounts.
How to Fix It: Coordinate your estate planning documents with all financial accounts. Your attorney can help ensure alignment.
6. Using Vague or Ambiguous Terms
The Mistake: Writing “my children” or “my family” without specifics.
Why is It a Problem? Ambiguity can create confusion or even legal challenges, especially in blended families or second marriages.
How to Fix It:
- Use full legal names and relationships.
- Consult an attorney to ensure your language is clear and enforceable.
7. Forgetting to Review Employer or Bank-Specific Forms
The Mistake: Assuming you’ve already taken care of beneficiary designations, but failing to confirm with all institutions.
Why is It a Problem? Typically, each financial institution requires its own form. Your instructions won’t be valid unless submitted to that provider directly.
How to Fix It: Contact each bank, insurance provider, and employer to confirm your current designations on file.
Don’t Let a Simple Mistake Derail Your Estate Plan
Your beneficiary designations are too important to leave to chance. A small oversight today could cause a big legal battle tomorrow. At Syverson PLLC, I help individuals and families in Florida create clear, comprehensive estate plans that protect what matters most.
Let me review your designations and align them with your broader estate planning goals to ensure that your loved ones are taken care of the way you intend. Contact me now to schedule a consultation.
