Although there are many facets of an estate plan, one that many take for granted involves the designation of a beneficiary to a life insurance policy, retirement account, or saving account. The process of deciding on and providing the name of a beneficiary would seem fairly straightforward. However, there are important issues to be considered when naming a beneficiary to these types of assets. Given the significant amount of funds that may be associated with these assets, beneficiary planning is an issue that cannot be taken lightly. Our New Mexico Attorneys have listed a number of issues to consider regarding beneficiary designations.
Failing to Name a Contingent Beneficiary:
While it is not unusual for someone to name their spouse or child as a beneficiary, many people fail to consider the possibility that they might outlive the named beneficiary. This is more likely when the beneficiary is a spouse, so it is important to name a contingent beneficiary. If a person fails to indicate a contingent beneficiary and outlives the primary beneficiary, the asset may need to go through probate. Probate proceedings will entail expenses that may diminish the value of the assets left for loved ones. Because these assets include beneficiary designations like insurance policies and retirement accounts, they might not be addressed through other estate planning tools like a will or trust, so they may pass under intestate succession law. The result is that your assets will pass according to the priority established by New Mexico law rather than your wishes.
Insufficient Special Needs Planning:
If you name someone with special needs related to a mental or physical disability, the decision to name that person as beneficiary may result in the beneficiary being disqualified from needs based government benefit programs. While there are strategies for using such funds for the care and support of someone who has special needs, a special needs trust can avoid an adverse impact on needs based testing.
Not Keeping Beneficiary Designations Current:
Because premiums on life insurance and contributions to IRAs, 401Ks and other retirement accounts are made over many years, the circumstances that led to the designation of a beneficiary may change several times during one’s life. It is important to review these accounts and insurance policies every few years and following major life events like divorce, marriage, birth of a child, and the like.
The above information is designed solely to illustrate general principles of law, and does not constitute a specific legal opinion on individual cases. We suggest that you contact experienced legal counsel for a specific opinion tailored to your individual circumstances.
If you have questions about estate planning issues in New Mexico, our New Mexico Attorneys at Jay Goodman & Associates, PC offer a free consultation in our centrally located offices in Santa Fe and Albuquerque so that we can discuss your specific situation. Call us today to schedule your free consultation at (505) 989-8117 to learn about your rights and options.