It’s Halloween, and tonight kids of all ages will be dressed in an assortment of costumes, many designed to frighten. What frightens an estate planner? Here are a dozen examples of scary planning (or lack thereof) with regard to life insurance and retirement plan beneficiaries:
1. Not naming a beneficiary at all (usually defaults to estate or next of kin).
2. Naming your estate as beneficiary of your IRA or retirement plan.
3. Naming a trust as beneficiary of your IRA or retirement plan (unless the trust is specifically drafted for that purpose).
4. Not changing your beneficiary designation when you divorce.
5. Not changing your beneficiary when your original beneficiary dies.
6. Naming minor children as beneficiaries.
7. Naming a beneficiary who is unable to properly manage money.
8. Naming a beneficiary who is receiving needs-based governmental benefits.
9. Naming a bankrupt beneficiary or one who has creditor problems.
10. Naming a relative to take care of and use the money for another relative (instead of using a trust).
11. Thinking your Will or Trust will control your life insurance or retirement account (it does not unless you specify it in the beneficiary designation.
12. Failing to get confirmation of any change of beneficiary from the financial institution.
Talk to your estate planning attorney to make sure that your beneficiary designations are properly coordinated with your estate plan/ This will best protect your family, preserve your assets and save taxes.