Beneficiary Designation Mistakes to Avoid

A living trust, also known as a revocable living trust, is a legal document created during a person’s lifetime to manage and distribute their assets. With a living trust, the person creating the trust (known as the grantor or settlor) transfers ownership of their assets to the trust, which is then managed by a trustee for the benefit of designated beneficiaries. These beneficiaries may include the grantor, other individuals, or even charitable organizations.

The main benefits of a living trust include the following:

Probate avoidance: Because the assets are owned by the trust, they do not have to go through the probate process after the grantor’s death. This can save time and money and keep the details of the grantor’s estate private.
Maintaining control: The grantor can retain control over their assets during their lifetime, and can change or revoke the trust at any time.
Providing for incapacity: If the grantor becomes incapacitated during their lifetime, a designated successor trustee can step in and manage the trust assets on their behalf.
Flexibility: The grantor can specify how the assets should be managed and distributed after their death, and can create specific provisions for family members or other beneficiaries.

Common Beneficiary Mistakes to Avoid

When creating a trust, it is important to get your beneficiary designations right to ensure that your assets will be distributed according to your wishes after your death, and that your loved ones will be provided for in the manner you intend:

Here are some common beneficiary mistakes to avoid with your living trust:

Failing to update your beneficiaries: A common mistake is failing to regularly review and update the beneficiaries listed in your living trust. Changes in your family structure, such as marriages, divorces, births, and deaths, may require updating your beneficiaries.
Not considering a beneficiaries ability to manage their inheritance: If you name a beneficiary who is not able to manage an influx of money on their own, this could result in the money being lost or squandered quickly. Also, minor children are prohibited from receiving direct inheritances. Consider appointing your trust as primary or secondary beneficiary (in consultation with your attorney) and adding provisions to your trust so that it manages the funds for spendthrift beneficiaries and for minor beneficiaries until they reach adulthood.
Not considering the tax implications: If you have a large estate, failing to consider the tax implications of your beneficiary designations can lead to unexpected taxes for your beneficiaries. Consult with an estate planning attorney or tax professional to understand the tax consequences of your living trust.
Failing to name contingent beneficiaries: Failing to name contingent beneficiaries means that if your primary beneficiary dies before you, the assets in your living trust may end up in probate or distributed according to state law.
Naming the wrong beneficiary: Be sure to name the intended beneficiary in your living trust if you want the proceeds to convey a certain way and not according to the residue. Failing to do so could result in your assets being distributed to someone you did not intend.
Not communicating your wishes to your beneficiaries: Failing to communicate your wishes to your beneficiaries can result in confusion and conflict. Consider discussing your living trust and your intentions with your beneficiaries to avoid any misunderstandings.

How a Virginia Estate Planning Attorney Can Help With Your Beneficiary Designations

Beneficiary designations can be tricky, and even small errors can cause significant problems. An estate planning lawyer can help you avoid common mistakes that can have negative consequences for your estate and heirs.

Ultimately, the role of an estate planning lawyer is to ensure that your wishes are carried out. By working with a lawyer to designate beneficiaries for your living trust, you can be confident that your assets will be distributed according to your wishes and that your loved ones will be taken care of after you are gone.

Contact an Experienced Virginia Estate Planning Attorney From Our Law Firm

Estate planning is unique to each individual and family, and it is important to work with a qualified estate planning attorney to ensure your living trust is tailored to your specific needs and wishes. Contact our law firm today at (703) 553-2577 or use the contact form to arrange a consultation with an experienced Virginia estate planning attorney.

The information on this site is for general informational purposes only. The information presented in this site is not legal advice or a legal opinion. You should seek the advice of legal counsel of your choice before acting upon any of the information in this site.