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Will These Life Insurance Mistakes Hurt You?

Life insurance is an important part of estate planning and taking care of the people you love after you pass away. Here are some common mistakes that you should avoid.

1. Not naming a beneficiary

Too many people forget to name a beneficiary or backup beneficiaries. Those mistakes can result in your life insurance proceeds having to go through the probate court process. That can tie up your money for months and even open up the life insurance proceeds to your creditors. And that can wipe out your funds.

2. Naming an individual as beneficiary to take care of that money for someone else

You might be tempted to list someone you know and trust as beneficiary of your life insurance, with the understanding that he or she would use that money to take care of another person that you have in mind. This could result in a number of problems. For example, you list your sister as beneficiary of your life insurance so that she can take care of your daughter.

3. Not keeping your beneficiaries up to date

Too many people forget to update their beneficiary designations.  You should review your beneficiary designations at least once a year so that you can make sure you update them upon events like divorce, deaths, and births.

4. Naming a minor as beneficiary

We see this ALOT. And it can result in expensive and time consuming complications for your family. That is because in Florida, minor children can’t directly inherit assets over $15,000. If a minor is listed as the beneficiary, the proceeds of your insurance will be distributed to a court-appointed custodian (guardian of the property), who will be in charge of managing the funds (often for a fee) until the age of majority, at which point all benefits are distributed to the beneficiary outright.

Instead of naming a minor as beneficiary, consider setting up a trust to receive the insurance proceeds, and name a trustee to hold and distribute the funds to a minor child you would want to benefit from your insurance proceeds. By doing so, you get to choose not only who would manage your child’s money, but also how and when the funds are distributed and used.

5. Naming an individual with special needs as beneficiary

If a loved one has special needs, chances are you want to help provide for a lifetime of care and protection. But if you leave the money directly to someone with special needs, it could disqualify that individual from receiving much-needed government benefits. Consider creating a “special needs trust” to receive the insurance proceeds. That way the money won’t go directly to the beneficiary upon your death, but it would be managed by the trustee you name and dispersed according to the trust’s terms, without affecting benefit eligibility.

You owe it to your loved ones to get this right.

Naming life insurance beneficiaries might seem pretty straight forward. But if you mess this up, you can create pretty big problems for the people you love.  But don’t worry, we can support you in planning for the people you love, whether it’s through life insurance or other tools such as wills or trusts.  Schedule an estate Planning Session to get started.

Call us at (813) 902-3189.

Estate Planning Mistakes Seniors (Including You or Your Parents) Can’t Afford to Make

Once you or your parents reach senior status, you really can’t afford to put it off any longer. Unfortunately, without proper planning, seniors can lose everything, even if they have family to look after them. Having a will isn’t enough.

More and more, the media is highlighting stories of seniors being taken advantage of, and even being targeted by unscrupulous professional guardians.

While planning for your incapacity and death can be scary, it’s even scarier to think of all the horrible things that can happen to your family if don’t have the right planning in place.

Here are a some of the most common mistakes that seniors make:

Mistake #1: Not creating advance medical directives

In your senior years, health care matters become much more relevant and urgent. At this age, you can no longer afford to put off important decisions related to your medical needs. How do you want your medical care handled if you become incapacitated and can’t communicate your wishes? And at the end of life, how do you want your medical care handled? You can address both of these situations with a Designation of Health Care Surrogate and a Living Will.

With the Designation of Health Care Surrogate, you appoint a health care decision maker that can step in for you when you can’t make your own health care decisions. With the Living Will, you provide guidelines for what medical care you want or don’t want at the end of your life. You can even include other instructions, such as who can visit you.

Mistake #2: Relying only on a will

Many people mistakenly believe that a will is the only estate planning tool they need. While wills are definitely one key aspect of estate planning, they come with some serious limitations:

● Wills require your family to go through probate, which is open to the public, can be time consuming and expensive.
● Wills don’t offer you any protection if you become incapacitated and unable to make legal and financial decisions.
● Wills don’t cover jointly owned assets or those with beneficiary designations, such as life insurance policies.
● Wills don’t shield assets from your creditors or those of your heirs.
● Wills don’t provide protections or guidance for when and how your heirs take control of their inheritance.

Mistake #3: Not keeping your plan current

Far too often people prepare a will or trust when they’re young, put it into a drawer, and forget about it. But your estate plan is worthless if you don’t regularly update it when your assets, family situation, and/or the laws change.

We recommend you review your plan at least every three years to make sure it’s up to date and immediately amend it following events like divorce, deaths, births, and inheritances. And if you have a trust in place, you need to make sure that you’re using it properly. Many people who have trusts aren’t using them effectively, leaving their property vulnerable to probate or mismanagement.

Mistake #4: Not pre-planning funeral arrangements

Although most people don’t want to think about their own funerals, pre-planning these services is a key facet of estate planning, especially for seniors. By taking care of your funeral arrangements ahead of time, you not only eliminate the burden and expense for your family, you’re able to make your memorial ceremony more meaningful, as well.

In addition to basic wishes, such as whether you prefer to be buried or cremated, you can choose what kind of memorial service you want—simple, elaborate, or maybe none at all. Are there songs you want played? Prayers or poems recited? Do you have a specific burial plot or a spot where you want your ashes scattered?

Pre-planning these things can help relieve significant stress and sadness for your family, while also ensuring your memory is honored exactly how you want. It’s important that you take care of your estate planning immediately and avoid these common mistakes.

We can walk you step-by-step through the process, ensuring that you have everything in place to protect yourself, your assets, and your family. Call us at (813) 902-3189.