Many financial accounts provide the account holder with the option to designate beneficiaries. If a beneficiary is designated on a financial account, upon the death of the account holder, the assets to the account do not pass according to the provisions of the decedent’s Last Will and Testament, but instead will pass to the designated beneficiary. Therefore, such designations are a crucial part of estate planning, and can significantly change the distribution of an estate. Yet beneficiary designations are over overlooked during the estate planning process. Accounts with designated beneficiaries must be considered when structuring your estate plan and when estate planning documents are being drafted. You must ensure your beneficiary designations are consistent with the rest of your estate plan and together with your estate planning documents accomplish your estate planning goals. I have met with many clients who needed significant revisions to their Will because their beneficiary designations were not considered when the Will was drafted. Beneficiary designations which are not considered during the consultations and drafting of estate planning documents often skew or even completely override the intent of the decedent.
Often, people do not consider the effect a beneficiary designation will have on their estate plan. Instead, believing it to be a simple decision, they just pick someone when asked by a financial advisor or when completing account paperwork. Sometimes, they don’t want to “bother” their attorney with questions about their accounts, which people often think of as separate from their estate plan. It is routine and expected for a life insurance agent or retirement account professional to ask for beneficiary designations, but it is also a common option now for brokerage and bank accounts. Clients often think they “named the same beneficiaries” on all of their accounts, but when documentation is obtained and reviewed, the beneficiaries designated often undermine their estate planning intentions.
It is always a good idea to consult with your various professionals – you lawyer, financial advisor, and insurance broker – to confirm that you have named beneficiaries where necessary, and that these designations are carefully considered to effectuate your estate plan.
Be sure to consider the following and discuss these concerns with your estate planning attorney:
Be sure that sufficient assets will pass through your estate. Your estate will need cash funds to pay specific bequests, debts, funeral expenses, and estate and inheritance taxes, etc. Therefore, it is important to ensure that there is enough to clear these expenses. Remember, cash is king. If your will leaves cash gifts to various people or charities, you need to make sure that enough money comes into your estate so that your executor can make these gifts.
Be sure that you consider all implications of any changes to designated beneficiaries. Sometimes, people decide to alter their beneficiary designations after their estate plan has been carefully created. They may become nervous about funding a trust or perhaps a financial advisor with only the best intentions suggests reviewing and changing the beneficiary designations on an account. You must consult with your attorney before making any changes to ensure that those changes do not disrupt your estate plan.
Be sure that your beneficiary designations contain correct information. The information you include on the change of beneficiary form must be correct, especially if the designated beneficiary is a trust. The trust name, trustee name and contact information and the trust tax identification number must be accurate. If you are not completely sure, call your estate planning attorney to find out.
It is important to ensure that your beneficiary designations work to effectuate your estate planning goals. Call or e-mail McLaughlin & Nardi, LLC for an estate planning consultation to review your plan and ensure that it accomplishes your goals.