An improper beneficiary on a life insurance policy, a pension plan (including IRAs and 401(k)s), an annuity or brokerage account can have disastrous results.
Estate planning is a three step process:
- The first step is to create the plan.
- The second step is to create the documents necessary to implement the plan.
- Unfortunately many lawyers stop there and don’t go on to the third and crucial step of funding the plan. This means if you have created a Living Trust, your assets must be titled in the name of the Trust, or the Trust won’t work.
Perhaps you have created a trust in your will for minor children or grandchildren. Naming them as the out right beneficiary of an IRA or life insurance policy means having to go to court to have a guardian or bank appointed to manage the money.
New York State’s Estates Power and Trusts Law severely limits how this money can be spent or invested. Naming a spouse who may be on Medicaid as a beneficiary can also have disastrous repercussions. Your money will go to Medicaid and not to your family.
Not naming proper beneficiary designations on retirement benefits can have expensive income tax consequences.
Spending the time, and in the overall scheme of things, not a lot of money and naming proper beneficiary designations and completing the correct titling of assets, should give you an ESTATE PLAN THAT WORKS.
This will give you the peace of mind we all want.