Think your estate planning is done once you've gone to the trouble of making a will or trust? Think again. All your hard work can be undone with a stroke of a pen when you open a bank, brokerage or retirement account.
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 will override your will or trust. Although my clients have heard this from me more than once, not everyone that reads my blog is a client so I thought I offer this in writing especially since no less august body than the Wall Street Journal is validating my advice.
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. As I mentioned, the Wall Street Journal issued this 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 includes 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.
You can learn more about this topic as well as other strategies on our website under the tab entitled: estate planning in Virginia. Be sure you also sign up for our complimentary e-newsletter so that you may be informed of all the latest issues that could affect you, your loved ones and your estate planning.
Reference: The Wall Street Journal (July 6, 2011)“Beware the Beneficiary Form”