Did you know that one small mistake in your estate plan can result in big changes in what your heirs receive? A recent case highlights just how easily these errors can occur. Fortunately, it also provides a perspective that can prevent this and many other mistakes from happening. In this particular estate, a man had noted on his IRA beneficiary form that any assets from the account should be distributed according to his will. And that’s where the trouble began.
This wasn’t an option on his beneficiary form and for whatever reasons, no one caught the mistake and as a result, it was invalidated to the point that it opened the door for his spouse to receive the value by default in its entirety. The family members in his will who he wanted to receive the assets were upset and sued. They lost the nearly one half million dollars to their new stepmother, who’d been married to their father for weeks before he died.
As estate planning lawyers, we stress the importance of remaining current on not only your will, but any beneficiary forms that leave assets to loved ones. Just as a new birth or a divorce can be a reminder to make changes to an estate plan, too often, people forget that there could be other forms that should be updated to ensure they’re able to bypass the probate process as well. Those accounts might include life insurance policies, CDs, any stocks you own, bank accounts, retirement accounts and much more.
Did you know there’s more than $6 trillion Americans have stored in IRAs, 401(k)s and other similar retirement vehicles? There’s a lot at stake and to overlook even just one of those beneficiary forms can result in many problems for your heirs after you’re gone.
We encourage our clients to carve out a small block of time once a year to review their beneficiary forms. Go past thinking to yourself, “I haven’t made in changes in my life so I don’t need to review those forms.” You’d be surprised at how many times our clients say, “I’m glad I checked it.” The goal is to ensure all of these beneficiary forms are cohesive and provide a seamless path to a legally sound resolution. Wondering how you’re going to remember to do this every year? Sometimes simple is better. You can set an annual reminder on your phone, your computer or tablet. Set it so that it coincides with other annual events – the holidays, your birthday or even tax season.
Also, pay attention to the mergers that are common in the financial sector. Has your bank merged with another? If so, be sure to update your forms so that they are current with any new policies.
Be sure to provide copies to your estate planning lawyer, who will keep it with your overall estate plan. Keep hard copies for yourself as well. If you keep electronic copies, be sure they’re safely stored in your cloud. The last thing you want is a hacker to compromise your account and get an eyeful on where your accounts are and all of the information that could make it easy for theft.
Finally, don’t underestimate the role of your estate planning attorney. We can help ensure there are no vulnerabilities in your efforts and provide guidance on those life changes that require a bit of additional attention. Give us a call today to learn more.
- The Intersection of Asset Protection Planning and Estate Planning – Part I - September 20, 2022
- If an Estate Owes Federal Gift and Estate Taxes, How Do I Pay Them? - September 15, 2022
- 5 Signs Pointing to a Will Contest - September 13, 2022