When looking at your assets, it is often a good idea to name someone as a beneficiary so that they will become the full owner of something upon your death. One common example of this is to have your spouse listed as a beneficiary on certain financial accounts so that they have immediate access to the money.
This leads many people to wonder why things like a Will or Trust is even necessary. Why not just list specific people as beneficiaries to all your assets so that the ownership changes hands seamlessly upon your death. While it certainly sounds simple at first, it would rarely go as smoothly as you might think. Look at some of the many problems that can occur when using beneficiaries in situations where they are not appropriate.
Paying the Estate
When you list someone as a direct beneficiary of an asset, it does not take into consideration any expenses that the estate will have. There may be a number of different things that need to be paid for by the estate, including taxes, general real estate maintenance, settlement of debts, and more. If all of the assets are distributed using direct beneficiaries, it can make this process much more complicated. It could even potentially leave your heirs in a difficult position where they need to find ways to cover the expenses from the assets they were listed as beneficiaries on.
Value of Assets Changes
Assets can change in value dramatically over time. If you want to divide your estate up evenly between multiple children, for example, it does not make sense to try to do this by naming each one as a beneficiary to different assets. Even if everything is equal at the time you list them as a beneficiary, it may not take long for things to become very unbalanced. Using a Will or a Trust will give you a lot more options for keeping things the way you want them over the course of time.
Relationship with Heirs
There are many reasons that you may want to make adjustments to your estate plan. You may have a falling out with a loved one, or you may need to add in a new grandchild or other person into your Will. With traditional estate planning methods, this is a straightforward process that can be done right away. If you have all your assets set up with beneficiaries, it will introduce a lot of unnecessary complications.
Following Established Estate Planning Processes
While it can be tempting to use beneficiaries as often as possible, that is not a good idea. Of course, naming someone as a beneficiary is appropriate in certain situations. The best way to know when and where to use this designation is to speak with an estate planning attorney and get everything set up properly based on your goals. Contact High Point Law Offices to schedule an estate planning consultation to learn how we can help.
