A client sitting in my office was visibly upset. Their parent had just died, and my client was responsible for handling their estate. An attorney sent over the most recent copy of the parents will, in which they left their estate equally to their three children; my client and their two siblings. When they contacted the insurance company however, they found out that their parents had listed a charity as the beneficiary of their life insurance policy. The client then contacted the custodian of their parents IRA only to find out that only one child had been listed as the beneficiary of the IRA account. The beneficiary designations had been put in place several drafts of their will prior, and hadn’t been updated in over a dozen years. Their question to me was “What can I do?” Unfortunately, the answer was “Nothing.”
Many people incorrectly assume that the will controls their entire estate. What you need to know is that insurance policies, annuity contracts, and retirement accounts are given directly to the listed beneficiaries, and never go through the will (unless the owner’s estate is listed as the beneficiary). For many clients, the majority of their assets are in retirement accounts. Their will may only really be giving away their personal property such as cars, collectibles, furniture, and such.
Part of the financial planning process is a review of client’s estate documents. As a financial planner, I am not legally allowed to draft estate documents, but I certainly can review them to ensure they are still in line with my client’s wishes. I frequently find that the beneficiary designations on their accounts and insurance policies do not match stated wishes in their will. Although it is possible that this was intentional, it is typically an oversight by the client.
Attorneys will draft the estate documents to craft an estate plan, but it is up to you as the client to ensure the plan is implemented. This means looking at every beneficiary designation to be sure they are in line with what you want. Also be sure you don’t overlook the contingent beneficiary listed. If the primary beneficiary is not living when you die, then the contingent will be given the assets.
You can Click Here to download a Beneficiary Designation Worksheet. List every insurance policy, annuity contract, and investment/retirement account that you own. Check the beneficiary designations for each of the accounts. You will find them in the original contract, online, or by calling the company. It may take some time, but it will be worth it.
The process is especially important if you have been previously married, as I have found ex-spouses listed as beneficiaries SEVERAL times. That is not something you want to leave your spouse to deal with after you have died.
So what do you think? Did you download the worksheet and check your beneficiary designations? Did you find any errors that you want corrected? Be sure to share in the comments section!
Alan Moore is a fee-only financial planner and founder of Serenity Financial Consulting in Shorewood WI. Follow him on Twitter @R_Alan_Moore. You can contact him at alan@serenityfc.com, 414-455-5313, or visit his website at www.SerenityFC.com. Want more education? Download your free guide to the “10 Easy Steps To Securing Your Financial Future Today.”
