The Background
Every estate plan consultation is unique. Clients bring up many and various concerns. However, the prime concern of all clients is that their assets pass to their beneficiaries as they intend.
Since life does not always go as planned, we work with clients to look ahead to “what if’s” that may come to pass. For example, ‘what if a beneficiary predeceases me, who will receive their share?’ or, ‘what if assets pass to beneficiaries too young or immature to handle the gift, who will manage the assets? How will they be managed?’
The planning for these and other contingencies are drafted into the Will and/or Trust. If the contingencies arise, the plan laid out in detail in the Will or Trust is carried out and applied comprehensively to all assets in the estate.
The General Concern
Bankers, financial advisors, insurance agents, and pension administrators will routinely ask customers if they would like to list beneficiaries, so the assets pass directly to the persons. In ideal circumstances such designations can and do work. However, in circumstances anything less than ideal, they often lead to unintended results.
As the example shows, beneficiary designations cannot do what a Will or Trust can do. They cover few contingencies, do not provide for asset management, and varying payment provisions at varying financial institutions will give you varying results – all compounded by the varying ability of varying account reps to recognize and implement legal planning issues. Plus, because account designations are so limited and vary in implementation, changing circumstances often requires piecemeal changing of multiple accounts. Coupled with the fact that most people forget, fail, or may be unable to update all or even some accounts when circumstances change, there is a real danger intentions will not be carried out.
The General Recommendation
If there are no tax or other planning concerns:
- If you are single, there should be no beneficiaries named on any of your accounts.
- If you are married, and you wish your assets to pass to your spouse, then you can safely designate your spouse as beneficiary on your accounts and policies. There should be no secondary or contingent beneficiaries named.
IRA’s & Pension’s: Time & Taxes
Many advisors are sensitive to these issues and will refer you to your attorney. Some believe they are saving you time & taxes, especially regarding IRA’s.
The fact is whether IRA’s are paid direct or through an estate, beneficiaries enjoy substantially the same tax benefits. Also, there is little, if any, added cost or time in having pensions/IRA’s pass with other assets in an estate. However, the cost of having your assets not pass as intended….
Conclusion
Let the Will / Trust you created carry out the work it was intended to do. Please also check with us. We are available to discuss the topic, at no cost.