I was having a discussion recently with a colleague about some of the most common misconceptions among people regarding estate planning. For example, as I've discussed in a past blog, your spouse does not automatically inherit your entire estate if you pass away with children. (You can see why that is a huge reason in itself to have an estate plan.) Another very common misunderstanding is regarding the order of priority for named beneficiaries and the beneficiaries listed in a Will.
Let me explain what I mean by differentiating the two types of beneficiaries. By "named beneficiary," I'm referring to someone that you explicitly place as a beneficiary on a specific asset. For example, a beneficiary on a life insurance policy or an IRA is a named beneficiary. Whereas, more generically, a beneficiary in a Will is exactly what it sounds like a person named in your Will to inherit a specific asset or assets.
So here's the issue: what happens when you have the named beneficiary listed as one person and the beneficiary in your Will for that same asset is listed as someone else? In short: named beneficiaries trump wills. More specifically, the named beneficiary listed on your life insurance policy will trump the person your leave your life insurance policy to in your Will.
It's easy to see why this is incredibly important. You can obtain a false sense of security when your Will is perfected but your named beneficiaries are not accurate. At Tressler & Associates, we want to make sure that your entire estate is transferred exactly as you intend and this is an example of a common mistake that we work to prevent in your plan.
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