There are many misconceptions among people regarding estate planning. For example, your spouse with whom you share children does not automatically inherit your entire estate if you pass away. This is an awfully big surprise to get after your partner passes away. Surely, you can see why that is a huge reason in itself to have an estate plan that has all your beneficiaries settled.
What are the Two Types of Beneficiaries?
Another common misunderstanding is in regards to the order of priority for named beneficiaries and the beneficiaries listed in a Will. Let us explain the difference between the two types of beneficiaries.
By “named beneficiary,” we are 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. It is a person named in your Will to inherit a specific asset or assets.
Where Wills Can Go Wrong
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. For example, the named beneficiary you list on your life insurance policy will trump the person you 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 you feel your Will is perfect, but your named beneficiaries are not actually accurate. At Tressler & Associates, we want to make sure that your entire estate transfers exactly as you intend and this is an example of a common mistake that we work to prevent in your plan.