Designating beneficiaries: Don’t Let Your IRA Get Derailed

August 29, 2013

Estate Planning, General Financial Planning

Imagine you’ve lined up your will, your trust, all the necessary estate planning documents, thinking you’ve covered your bases. But here’s one you may have forgotten: naming beneficiaries for your IRA. A friend recently found out the hard way that this easily overlooked detail causes huge headaches. You see, her mother wasn’t sure who to name when the account was opened and decided to think about it. Time went on and her mother passed away before this detail was corrected, sending the IRA to probate. The two intended beneficiaries will eventually get the money, but they will be forced to take the distributions much faster than they want (and absorb the tax implications), rather than stretching the payments over a longer period of time.

Here are some potential problems when a beneficiary is not named on an IRA:

There is no backtracking by trustees or personal representatives to “fix” the omission
The account will be distributed according to your will; through the probate process which can be lengthy depending on the complexity of the estate
The account becomes subject to the creditors of your estate
The opportunity for tax deferral by spreading out distributions over a longer period of time may be lost.

It seems easy enough to name a beneficiary, but the reality is that this important designation is often overlooked. To prevent unforeseen mishaps, have your IRA beneficiary form reviewed by your financial planner annually to make sure it reflects your wishes and fits with your overall financial planning objectives.

Laurie Renchik, CFP®, MBA is a Senior Financial Planner at Center for Financial Planning, Inc. In addition to working with women who are in the midst of a transition (career change, receiving an inheritance, losing a life partner, divorce or remarriage), Laurie works with clients who are planning for retirement. Laurie was named to the 2013 Five Star Wealth Managers list in Detroit Hour magazine, is a member of the Leadership Oakland Alumni Association and in addition to her frequent contributions to Money Centered, she manages and is a frequent contributor to Center Connections at The Center.

Five Star Award is based on advisor being credentialed as an investment advisory representative (IAR), a FINRA registered representative, a CPA or a licensed attorney, including education and professional designations, actively employed in the industry for five years, favorable regulatory and complaint history review, fulfillment of firm review based on internal firm standards, accepting new clients, one- and five-year client retention rates, non-institutional discretionary and/or non-discretionary client assets administered, number of client households served.

The information has been obtained from sources considered to be reliable, but we do not guarantee that the foregoing information is accurate or complete. Any opinions are those of Center for Financial Planning, Inc., and not necessarily those of RJFS or Raymond James. You should discuss any tax or legal issues with the appropriate professional.

Laurie D. Renchik, CFP®, MBA

August 6, 2013

Estate Planning

Why Estate Planning isn’t just for Multimillionaires

Laurie D. Renchik, CFP®, MBA

August 6, 2013

Estate Planning

Putting an estate plan in place is so much more than saving taxes. It provides a roadmap for folks who want to better preserve, protect and transfer wealth to the people they care most about. Last year, the American Taxpayer Relief Act (ATRA), made permanent the gift and estate tax exemption amount. In 2013 that amount is $5,250,000 for individuals and $10,500,000 for married couples. But you don’t have to leave behind millions to still need careful planning.

Key takeaways to consider:

Having an estate plan, including a will, generally means a family can avoid much of the intestate probate process. Proceedings vary state to state, but without a proper estate plan, many families could experience costs, including time, money, and loss of privacy.
An appropriate solution designed to avoid any probate process is often the creation of a living trust, which helps maintain control over assets and seeks to avoid uncertainties for the family and designated beneficiaries.

Other important considerations:

Designating guardianship for minor children and grandchildren will reduce the court’s control over both the minor’s inheritance and caretaker.
Establishing a charitable plan as part of the estate plan ensures designated assets will be distributed to the charity of choice rather than by state law.

Finally, while an estate plan protects assets and family, it also provides the opportunity to pass on cherished values through gifts to family members or favorite charities. A written reflection of hopes for the future and life lessons learned can be conveyed through legacy letters and ethical wills. Putting an estate plan in place addresses legal and tax issues and ultimately ensures assets will be used according to your wishes.

The information has been obtained from sources considered to be reliable, but we do not guarantee that the foregoing material is accurate or complete. Any opinions are those of Center for Financial Planning, Inc., and not necessarily those of RJFS or Raymond James. You should discuss any tax or legal matters with the appropriate professional.