Law Office of Macklin K Everly

When planning your estate, beneficiary designations play a critical role in ensuring your assets are passed to the right individuals according to your wishes and without unnecessary delays or complications. While creating a will or trust is essential, it’s equally important to properly designate beneficiaries for accounts like retirement funds, life insurance policies, and payable-on-death (POD) bank accounts. Failing to update or correctly designate beneficiaries can lead to unintended consequences, disputes, and even probate court intervention. Here are some common mistakes Ohio residents should avoid when handling beneficiary designations.

1. Not Updating Beneficiary Designations After Major Life Events

One of the most common errors is forgetting to update beneficiary designations after significant life events like marriage, divorce, the birth of a child, or the death of a previous beneficiary. Ohio estate law is clear: your beneficiary designations take precedence over your will. This means that if you remarry but forget to update your life insurance policy, your ex-spouse will still receive the payout if they are the listed beneficiary.

To avoid this, regularly review your beneficiary designations and update them after major life changes. Ohio law allows you to make changes easily with most financial institutions and insurance companies. However, failing to do so could result in costly litigation or the wrong individual inheriting your assets.

2. Naming Minor Children as Direct Beneficiaries

Many parents naturally want to leave assets to their children. However, naming a minor child as a direct beneficiary can complicate matters under Ohio law. If a child is named and they are still under 18 when you pass away, the probate court will typically appoint a guardian to manage the funds until the child reaches adulthood. This process can be both time-consuming and expensive.

A better solution is to establish a trust for the benefit of the minor and name the trust as the beneficiary. This way, the trustee you designate will manage the assets for the child until they are old enough to handle them responsibly.

3. Failing to Name Contingent Beneficiaries

Naming a primary beneficiary is essential, but what happens if that individual passes away before you or declines the inheritance? In Ohio, if you fail to name a contingent (secondary) beneficiary, the assets may end up going through probate, which could result in an expensive, lengthy, and public process.

Always name a contingent beneficiary to ensure your assets are distributed according to your wishes, even if the primary beneficiary cannot receive them. For example, if you name your spouse as your primary beneficiary, you might name your children as contingent beneficiaries to safeguard against unforeseen circumstances.

4. Assuming Your Will Overrides Beneficiary Designations

Under Ohio law, beneficiary designations on accounts like 401(k)s, IRAs, and life insurance policies take precedence over the provisions in your will or trust. Many people assume that their will controls all their assets, but this isn’t the case for accounts with designated beneficiaries.

For example, if you name your sibling as a beneficiary on your retirement account but later change your will to leave everything to your spouse, the retirement account will still go to your sibling unless you update the beneficiary designation with the financial institution.

5. Not Coordinating Beneficiary Designations with Your Overall Estate Plan

It’s essential to ensure that your beneficiary designations align with your overall estate planning strategy. In Ohio, a well-drafted estate plan might include a will, a trust, powers of attorney, and health care directives (such as a living will). But if your beneficiary designations conflict with these documents, it could create confusion and lead to unintended outcomes.

For example, if your trust outlines specific instructions for distributing your assets but your beneficiary designations are outdated, your assets could bypass the trust and go directly to the named beneficiaries, potentially defeating the purpose of the trust.

To avoid this, you should work with an estate planning attorney who can help you coordinate all aspects of your estate plan and ensure consistency across your documents.

Properly handling beneficiary designations is a critical aspect of estate planning in Ohio. By avoiding common mistakes like failing to update beneficiaries after life events, naming minor children directly, or assuming your will overrides your designations, you can help ensure your assets are distributed according to your wishes. Regular reviews and coordination with your estate planning attorney can help you avoid costly errors and protect your legacy for your loved ones.

For assistance with updating beneficiary designations or any other estate planning concerns in Ohio, schedule a free virtual consultation with me. I’m here to help you create an estate plan that meets your needs and complies with Ohio law.