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DO
YOU REALLY KNOW TO WHOM If you are like most people (with the exception of those of you who are estate-planning attorneys, of course), any death related planning is oftentimes met with dread, disdain or “put off until another day.” Most of us don’t want to think about our ultimate demise, much less plan for it and pay someone money to provide advice and commit a plan to paper. And this is why many estates pay needless dollars to Uncle Sam, high administration fees and probate costs every year. There has been much speculation in the press recently about the repeal of the estate tax. We have even heard people say that they are postponing making their estate planning decisions because “we may not need to have estate planning documents if there isn’t an estate tax.” Nothing could be further from the truth! If you have specific bequests or assets that you would like to leave to a charity, neighbor, friend, etc. and you do not have a will or trust, you are considered to have died intestate. By choosing not to implement your own estate plan, you actually have made an estate planning choice: by default you will have the estate plan of the state in which you reside. This means that your neighbor may not get your favorite china, your favorite charity may not receive your intended bequest, or your close friend may not receive your gold watch. If you are married and you want your spouse to inherit everything, you might be surprised to learn that your spouse will have to share your assets 50%/50% with your children. In short, you have forfeited the right to “have it your way.” Over the years we have seen many clients who thought they had their legal affairs in order: they had living trusts, pour over wills, living wills and health care powers. While the documents were certainly in order, a closer look into their life insurance or IRA beneficiary designation forms revealed some inconsistencies with their intended plans. For example, one client, who for the purposes of this article we will refer to as Donald, has three sons, two living and one deceased: Huey, Dewey and Louie (deceased). The boys each have at least one child. The primary beneficiaries of Donald’s IRA were Huey, Dewey and Louie (we know this is corny, but bear with us – it makes this example easier to read). His estate was named as contingent beneficiary. Donald’s intention was to leave his IRA dollars first to his sons and then to his grandchildren. According to the beneficiary designation, at Donald’s death, Huey and Dewey would inherit the IRA, however, when we asked Donald if he intended to cut Louie’s child out of the IRA inheritance, he responded with a resounding “No!” He incorrectly assumed that Louie’s share would automatically pass to his child. We suggested that the client submit a special beneficiary designation to the IRA custodian with verbiage that would include Louie’s child in the IRA inheritance. We also suggested that the contingent beneficiary be changed to Donald’s living trust to keep the IRA dollars out of probate court. Just as an annual checkup with your doctor is an important component to maintaining your health and physical well being, a periodic estate review should be an integral part of your overall financial health review. Our Certified Financial Planners™ will be pleased to discuss this article or any other financial concerns that you may have. April 2001
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