April 03, 2013


Credit: imagerymajestic
Have you ever had one of those Snickers “Wanna get away” moments? I know I have. There was the time when I was playing the White Rabbit in a comical version of Alice in Wonderland, and right in the middle of my solo, I looked over and realized my nice, fluffy, white tail had become detached from my pants. There was also the time when I complimented the beauty of someone’s relative’s cremation urn. Most recently, there was that moment when I came downstairs to see my “angelic” dachshund playing in the confetti of what used to be my wife’s work time sheet and to-do list for the week that she had asked me to move a little earlier in the day if I was going to let the puppy out. Uh-oh!

Uh-oh moments are a part of life, but some can be prevented. Part of my job as a financial planner is helping clients try to prevent financial uh-ohs, and the most common areas where I see blatant financial uh-ohs are actually estate planning and beneficiary designations. Today, I want to talk about a few common estate planning uh-ohs that you will want to make sure you and your loved ones avoid.

  • Whose Name is Where?
    • Many people are surprised to learn that their designated beneficiaries on retirement accounts and life insurance policies trump any designations in their wills. If a husband was suddenly killed and left everything in his will to his second wife, but the most recent beneficiary designation on file with his company’s 401(k) plan still lists his first wife as the beneficiary, the first wife will walk away with the 401(k) plan proceeds. If a grandmother’s relationship has fallen apart with one of her three grandchildren, and in her will she states her wishes to transfer assets to only two of her grandchildren, but the most recent beneficiary designation on file for her life insurance policy lists all three, the grandchild who has fallen out of favor will still receive his/her share. Wills and estate plans are not worth the paper they are written on if you do not make sure your beneficiary designations are properly coordinated with your wishes!
  • Are Your People Still Your People?
    • I’m not naive enough to think that most people enjoy updating their estate plan, but it really is necessary to periodically examine what you have in place to ensure that your wishes are actually fulfilled. Are your children’s named guardians still the people who you would like guarding your children? Have you even named a guardian for your children? Do you still want to give your uncle who has developed that gambling problem a share of your earthly wealth? At his age, is your older brother still mentally and physically capable to serve as your executor? Is your daughter who has now moved across the country still the best person to be your financial and health care power of attorney should something happen? Life changes and people do, too. If it’s been awhile since you looked at your will, there is a chance someone has passed away, someone has moved, someone is no longer capable to act in the capacity you formerly intended, or someone is no longer an individual who you would like to benefit through your final wishes. If any of these possibilities are the case, it’s probably worth dusting off your old estate plan to make sure there is no stone unturned.
  • Is It Still Going Where It is Supposed To Go?
    • Attorneys often use relatively flexible language in their client’s wills so that every time Congress slightly tweaks the tax law, their clients don’t have to come running back to rewrite their wills to match the new laws. While this is a great practice and an idea appreciated by all parties involved, the estate tax law has changed a good bit over the past few years - enough that I would urge you to take a look at your estate plan if it’s been awhile. For example, let’s say a lady has $3 million, and she specified in her 2003 will that she wanted to leave the maximum estate tax exemption at the time of her death to her son and the remainder to her husband. Well at the time the will was written in 2003 that meant $1 million to her son and $2 million to her husband. However, in 2013, that means $3 million to her son and not a dime to her husband because the current estate tax exemption is $5.25 million. I know this example has a lot of zeroes, but the point is the same - if the lady with the $3 million dies without reading this post and updating her will, her surviving husband will probably be saying more than “Uh-oh!”
Death is one of the two certainties in life according to Benjamin Franklin, and it is often a big enough burden on the deceased’s friends and family without a nasty financial surprise. If this post has given you the slightest doubt in your current estate plan’s ability to fulfill your wishes, I urge you to please make time to take a look.

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