Titling accounts incorrectly could be a financial disasterWritten by Nolan Baker Mark Clair | | firstname.lastname@example.org
A couple of years ago, an elderly lady came in to talk about her estate plan and have her documents reviewed. She had set up a living trust years ago and wanted to make sure everything was up-to-date. We looked over her documents for her and began to ask her questions about how her accounts were titled. She said that her accounts were all titled in her name. Mark asked her if she knew that if she died that all of her accounts would go through probate? She was shocked and almost in tears to find this out since the purpose of her living trust was to avoid probate. She said “you mean to tell me that if I died, my living trust would do nothing to help my assets avoid probate? What good is it?” We then explained how important it is to take the final step and actually fund the trust by changing the title of accounts and real estate to the trust.
This lady was smart enough to take the step to set up a trust with the goal of more of her money getting into the hands of her children, rather than going to lawyers, courts, fees, etc. The problem was that she did not take the important final step. Making sure the accounts were properly titled. Perhaps no one told her what to do. Maybe they did and she neglected to take these steps. This is the biggest mistake people make when setting up a living trust. To avoid probate certain accounts should be titled with the trust as owner. We helped her get things corrected very quickly, but what a shame it would have been if she had paid good money to set up a trust and it ended up not helping her a bit.
Here is something else to consider. If you own a 401(k), IRA, annuity, 403(b), life insurance or any other account that has a named beneficiary, listen very closely. A huge percentage of people do not have a correct updated beneficiary form on all of their financial accounts kept at home that they have quick access to. Most trust that the correct information is on file with their custodian. Unfortunately, many will be wrong about this and it will be too late.
Here is another story. Mary had been a teacher for 30 years when she suddenly passed away from a heart attack. She had remarried and had been with her current husband for many years. They were truly a loving couple. Some time after Mary’s death, her husband Todd started the process of addressing their financial affairs. He went to the school district and got the paperwork to file a claim on her teacher’s retirement only to find out he was not the beneficiary.
Mary had started teaching prior to being married to Todd. When Mary filled out the original paperwork, she listed her brother as beneficiary of her account.
Todd went to court and even the children testified that their mother loved Todd and would have wanted him to inherit her retirement account.
Unfortunately, with Mary gone, all the court had to rely on was her written instructions. You can guess what happened.
Think it couldn’t happen to you and your family? Think again. Here are just a few examples of potential pitfalls. Naming your trust as beneficiary, saying “divided equally among children”, forgetting per stirpes language (bloodline), unintentionally disinheriting grandkids and assuming your financial institution has your form on file.
Here is what to do. Review each and every financial, insurance and asset you own and review the titling and the beneficiary designation. For our clients, we use a checklist call our B.O.S.S. system.
This system is designed to review the beneficiary, owner, survivor, and spouse of each account. This step-by-step checklist helps provide peace of mind by significantly increasing the odds that the forms are up to date and filled out correctly.
Can you put your hands on your beneficiary forms and are they correct? You can get a copy of this helpful checklist by going online to www.retirementguysradio.com and requesting the beneficiary form checklist.
When someone passes away, there is no second chance, no “do over,” so get it right now before something happens.
Do it today. It is one more step to take that will lead to a happy and relaxing retirement.
Got a question for The Retirement Guys? Send your e-mails to email@example.com or you can reach them by calling (419) 842-0550. Securities are offered through NEXT Financial Group Inc., Member FINRA / SIPC. The Retirement Guys are not an affiliate of NEXT Financial Group. Their office is located at 1700 Woodlands Drive, Suite 100, Maumee, OH 43537.