Forgetting Your Beneficiary Forms May Defeat Your Estate Plan
The failure to correctly complete the forms that designate the beneficiaries of your life insurance policies and retirement plan accounts may undermine your entire estate plan. Here are a few tips on doing it right.
Never name your estate as the beneficiary or permit your estate to become the beneficiary by default. Permitting your estate to be the beneficiary deprives the ultimate beneficiary of significant income-tax benefits and strips the assets of their protection against the claims of creditors.
Never name a friend or family member as beneficiary and make her promise to use the money for your child. Three big problems immediately come to mind. First, the friend has no legal obligation to use the money for your child. Second, if your friend gets a judgment against her, her creditors may take the money. Third, if your friend dies or gets divorced, her husband, not your child, may get the money.
Never name a minor child as beneficiary. Most couples name their minor child as contingent beneficiary; this is not a good idea. First, someone will have to ask the court to appoint and qualify him as guardian of the minor's property. Second, the child will get full control over the money on his eighteenth birthday.
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