In the last live course in Newport Beach, many questions came up regarding beneficiary designations. This is not a riveting area of estate planning, but it is so so important.
Think about it. What a bummer to have a beautifully drafted trust for your clients and frustrate part or all of the estate plan because the beneficiary designations are incomplete or inaccurate.
Take a look at the designations!! When it comes to the point in the client interview when the client says – “oh, don’t you worry about it, our designations are already done”, – don’t believe them!! Get a copy and review them yourself.
Here are a few things you may discover:
- There are no beneficiaries designated. If that is the case the plan and documents might set forth default beneficiaries such as “estate”. This can be a disaster if the document is a an IRA and the desired outcome is a stretch out of the IRA over the life of the beneficiary.
- There are no contingent beneficiaries. Again this can kick in unwanted default provisions if the primary beneficiary does not survive.
- The primary or contingent beneficiary is a minor who is unable to accept property. Think about naming the trustee(s) of the children’s trust or the custodian of a UGMA account.
- The designations have not been updated since major life events – i.e., a client’s divorce or a primary beneficiary’s death.
- The attorney drafted designation form that their last estate planning attorney drafted was never accepted by the administrator. Many attorneys prefer drafting their own vs. the plan administrator’s over simplified one line form. If you submit your own designation form confirm that is is accepted by the administrator.
- There is no beneficiary designation form. After the passage of time, confirm that the correct designation is on file. If a beneficiary designation form was done 5 years ago, insure that it is still on file with the administrator.
Remember!! Don’t rely on the client’s representations here! Check yourself!