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Mistakes to Avoid- Only One Child Named as Beneficiary

Beneficiary designations, account titling (ownership arrangements), and traditional estate planning tools (trusts and last wills) work together to create a fully functioning estate plan. Another common mistake made with beneficiary designations and ownership arrangements includes naming only one child named as beneficiary of a life insurance policy or deposit account.

A parent with several children will sometimes name only one child as the sole beneficiary of a bank account or life insurance intending that this child use the proceeds to pay for a funeral and then distribute the leftover balance among the siblings.

However, the child named as beneficiary is under no legal obligation to use this money for your intended purpose. He or she could legally “walk away” with the account balance. Additionally, this child may incur gift tax consequences when he or she distributes the balance to siblings

Over the next several posts we will explore these common mistakes in more detail.

To be continued….
Aaron E. Futterman, CPA, Esq. is a partner in the law firm of Futterman & Lanza, LLP with offices in Smithtown, NY and clients throughout Suffolk, Nassau, Queens, Brooklyn, Bronx, Richmond, New York, Westchester and Rockland Counties. He concentrates his practice to Elder Law, Medicaid Planning, Medicaid Applications, Estate Planning, Probate, Estate Taxes, and Estate Administration.

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