Beneficiary designations: Common mistakes and how to avoid them

On Behalf of | Jul 20, 2022 | Estate Planning |

Even people in Alabama who are careful about their estate planning may sometimes make mistakes with beneficiary designations. It can be easy to overlook these or to not understand how they fit in with the rest of the estate plan, but because beneficiary designations will override any instructions that you put in your will , it is important to keep them accurate and up to date.


As with other elements of your estate plan, clarity is important in naming your beneficiary. That means ensuring that the name of your beneficiary is exactly correct. People may change their names, or they may have a Jr. or Sr. after their name. The name needs to be precise so that there no is doubt about who your beneficiary is.

Blank forms

Some people may fail to name a beneficiary at all. If you do not fill out the forms for your retirement account, life insurance policy or similar assets, the court generally decides what happens to the assets. Unfortunately, in some cases, this can mean that the assets have to go through probate. If this happens to a retirement account, there can be tax implications.


Your plans for your loved ones may go awry if you leave assets to minors, people who struggle to manage their money or to loved ones who receive government assistance because of a disability. A trust is generally a better choice with a trustee appointed to manage it. Minors cannot inherit property, but a trust can keep their inheritance safe until they are 18 or even older. For loved ones with special needs, a trust can keep those assets separate so that their benefits are not affected. Things can then be paid for directly from the trust.

Finally, with all of the above in mind, beneficiary designations should be reviewed regularly to make sure they are still up to date. As is the case with other parts of the estate plan, it might be necessary to make changes as family dynamics change or in response to such things as births, deaths, marriages or divorces.