Don’t Disinherit Your Loved Ones By Mistake—Review Your Estate Plan Regularly
August 21, 2011
All of our readers know just how important—how essential—a will or trust is to protecting your family after you pass away. Leaving clear and tangible instructions can prevent family infighting as well as hurt or unsettled feelings; and leaving a legally airtight will can prevent wasted time and money in unnecessarily long probate proceedings. But for all of this, there are a few assets that your will may not be able to address.
This article in CNN Money describes three assets that could cause you to “unwittingly disinherit intended beneficiaries, including your children, from significant portions of your estate,” namely your 401(k) plan, your IRA account, and your life insurance.
You can name anybody you’d like as a beneficiary in your will or trust, but when it comes to 401(k) plans it’s your spouse who is entitled to the money when you die. “If you want to leave a 401(k) to someone else, your spouse must first file a written statement waiving rights to it.” Even a prenuptial agreement won’t help if you want to keep your 401(k) assets out of the communal pot, you’ll have to convince your spouse to sign a waiver after you’ve tied the knot. “A person can’t give up spousal rights to inherit a 401(k) until actually married. ‘A prenup by itself is not a valid waiver according to the rules governing 401(k) plans.’”
Who will inherit your IRA or your life insurance is a little easier to control than who will inherit your 401(k). In the case of IRA or life insurance accounts the person named as the beneficiary on the account will always take precedence over a beneficiary named in your will. The most common inheritance issues we see with these accounts is when people forget to update their beneficiary forms after a significant life change such as a divorce or the birth of a child. In these cases it’s important to review and update your beneficiaries every 2-5 years to ensure there’s no confusion between your will and the designated beneficiary on the account.
Having a will or trust is important, but they are only a piece of a whole plan—a plan that likely includes many pieces. Being aware of all the pieces of your estate plan, and keeping those pieces working together and in harmony, is essential to ensuring that your family and your legacy is protected.
Do Life Insurance or Retirement Benefits Have to Go Through Probate?
October 3, 2009
We may acquire many assets over the course of our lives now—bank accounts, stocks, real property, life insurance, retirement, and more—it’s almost impossible to know what has to go through probate and what doesn’t.
The answer to the question in the title, above, is “no”; life insurance and retirement benefits do not have to go through probate if the account has a named beneficiary. Benefits from life insurance accounts can be paid directly to the named beneficiary, and money from IRAs, Keoghs, and 401(k) accounts transfer automatically to the named beneficiaries of those accounts as well. The persons named as beneficiary, however, will most likely want to consult with a financial advisor before drawing these benefits, as there may be tax ways of handling these accounts which minimize tax to the beneficiary.
Yet another type of account that is not subject to probate is a “pay on death” (or POD) account, the money from which can pass directly to the named beneficiary upon the death of the owner.
Probate laws vary from state to state, so contact our office—or your own local attorney who specializes in probate—for more information.
Procrastination is Not a Planning Tool
May 13, 2009
The number one reason that people die without protecting their assets or their heirs is not that they lack the money to create an estate plan, and it’s not that they don’t know that they need one, or how to create one—It’s procrastination. Most people who die without an estate plan in place do so because they dawdled.
For most of us it’s all too easy to put off thoughts of sickness or death, and all planning for the unlikely—but inevitable—event gets pushed to the wayside. Writer M. P. Dunleavey reminds us in the article Last Things Can’t Wait Till Last that procrastination is not a planning tool and that in actuality, once you buckle down and start, protecting your heirs is not such a difficult process after all; especially if you have the right person helping you.
At our office we agree with Dunleavey’s article to the extent that we want to ensure that you have everything you need to best protect your assets and your heirs without making it unnecessarily complicated. Life insurance, guardianship, planning for Long Term Care, wills and trusts: taken piece by piece they can overwhelm even the staunchest of individuals; but our office can help you sort through each of these issues together, and be confident in your future security and the security of your heirs.
In a world with complicated tax laws, and in which we often have very complicated lives, it’s nice to know that your estate planner is working to make your life simpler.
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