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Incorrect beneficiary designation is one of the most common estate planning mistakes people make and can lead to undesirable tax consequences as well as family feuds over assets.

If you are the owner of a qualified plan – and IRA, 401(k), annuity, life insurance policy or another plan that qualifies for income tax benefits – then you need to name a beneficiary for each of these financial plans. If you fail to do so, the assets in each plan will be distributed according to the rules established by the financial institution that regulates the plan.

You must also take care when designating beneficiaries to be as specific as possible. For example, if you designate that your assets go to “living children” and one of your children dies before you do, that child’s heirs will not inherit anything that may have gone to a deceased parent.

If you leave qualified plan assets to a beneficiary that is a minor and don’t name a guardian, those assets will be managed by a guardian appointed by the court – someone you may not necessarily want to be performing this duty or who may not follow your wishes.

And if you get divorced or your spouse dies and you have not updated your beneficiary designations, your heirs will have to endure an expensive and lengthy probate process to straighten things out. In the case of divorce, your ex could very likely inherit your plan assets, since a beneficiary designation form takes precedence over a will.

The Flanigan Law Group provides Southern California residents with personal attention for estate planning, administration and litigation legal services. When disputes between families, arise, they are very successful in resolving legal estate issues quickly and efficiently while preserving financial and emotional resources. Contact the Flanigan Law Group at 949-450-0042.