What is the quickest way to un-do an otherwise carefully planned estate?
Open a bank account, brokerage or retirement account.
Why? Because the beneficiary designations on these accounts override your will. Yes, it’s true – the beneficiary designation is the estate planning trump card. And many an estate plan has come undone because of carelessly named beneficiaries.
The Wall Street Journal last week issued a warning in an article entitled Beware the Beneficiary Form.
“People don’t realize the importance of this,” says Martin Shenkman, an estate planning lawyer in Paramus, NJ. A carelessly named beneficiary on a financial account can cause a loved one to be disinherited, a disabled child to lose government benefits, and heirs to be slapped with a big tax bill.
The Journal also offers a few tips to protect you from this type of estate plan destruction, to include:
Know what kinds of accounts have beneficiary designations. Did you know that U.S. Savings bonds have a beneficiary form? Other accounts for which you may have named a beneficiary include retirement accounts, life insurance policies, bank accounts, certificates of deposit, stocks, bonds and mutual funds.
Review your beneficiary designations regularly and certainly after any life-changing event such as a marriage, divorce, birth or death of a loved one. Also, job-changers and retirees take note: Beneficiary designations on retirement plans don’t carry over when you roll a 401(k) to a new employer’s plan or to an IRA, or when you convert a regular IRA to a Roth IRA.
At Idaho Estate Planning we educate our clients on the proper procedures for naming beneficiaries. Our Life Plan™ Members also participate in a yearly review of the assets contained in their estate plan and any changes made through the previous year. If you have been considering putting your estate plan together, we have the experience and expertise to help you maintain your options and protect yourself as well as your loved ones now and into the future. The best time to plan is always now! Remember, good planning is no accident!