Contributed by: Sandra Adams, CFP®
When most clients think about their estate planning, they think about the actual drafting of the documents — their Wills, Durable Powers of Attorney, maybe their Trust. While the documents themselves are crucial components of a comprehensive plan, one often-overlooked step is the annual review of account beneficiaries and account titling to make sure they are consistent with the estate documents. Together, these two parts of the plan can significantly impact how your assets are distributed after you pass away, so it is vital to ensure they align with your overall estate planning goals.
Why Review Beneficiaries?
Beneficiary designations on accounts such as retirement plans, life insurance policies, individual investment accounts (Transfer On Death designations), and bank accounts (Payable On Death designations) supersede what is written in your will. This means that if your beneficiary information is outdated, your assets could go to someone you no longer intend to receive your assets or even unintentionally create tax liabilities or complications for your loved ones.
For instance, you might have named your ex-spouse as a beneficiary years ago. If you have forgotten to update your beneficiary designation, this could lead to a distribution that contradicts your current wishes (unless, of course, you still wish to leave money to your ex-spouse!). Annual reviews of these designations ensure that beneficiaries reflect your present intentions and changing life circumstances — whether it is marriage, the birth of a child, or the passing of a loved one.
The Role of Account Titling
Equally important is ensuring your account titling is consistent with your estate planning goals. Joint accounts, for example, can pass directly to the surviving account holder, potentially bypassing your will’s instructions. If your accounts are titled improperly, your assets may not flow according to your plan, leading to unintended tax consequences or family disputes.
By reviewing your account titling annually, you can confirm that your assets are positioned in the most effective way to meet your estate planning goals and minimize the risk of probate court or conflict.
Work with your financial planner to make sure regular reviews of both beneficiaries and account titling are a part of your annual estate planning review process to give you peace of mind and ensure your wishes are honored when the time comes. If you or someone you know needs assistance with an estate planning review, feel free to reach out — we are always happy to help. Sandy.Adams@CenterFinPlan.com
Sandra Adams, CFP®, is a Partner and CERTIFIED FINANCIAL PLANNER™ professional at Center for Financial Planning, Inc.® and holds a CeFT™ designation. She specializes in Elder Care Financial Planning and serves as a trusted source for national publications, including The Wall Street Journal, Research Magazine, and Journal of Financial Planning.
The foregoing information has been obtained from sources considered to be reliable, but we do not guarantee that it is accurate or complete, it is not a statement of all available data necessary for making an investment decision, and it does not constitute a recommendation. Any opinions are those of Sandy Adams, CFP® and not necessarily those of Raymond James. While we are familiar with the tax provisions of the issues presented herein, as Financial Advisors of RJFS, we are not qualified to render advice on tax or legal matters. You should discuss tax or legal matters with the appropriate professional.
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