Thursday, October 4, 2012
1. Beneficiary Audit: You should start by evaluating what beneficiaries you currently have assigned.
2. No Beneficiary: If you come up with assets that are missing beneficiaries, you should be sure to provide at least one for all assets that normally avoid probate court have a beneficiary assigned to them.
3. No contingent beneficiary: It is best to provide back-up beneficiaries.
4. Adding "per stirpes": Adding this term ensures that if one of your children predeceases you, his or her share is to continue through the same branch of family and go to his or her children.
5. Not providing additional detail: You can add more detail than the fill in the blank section provides when you are designating a beneficiary on forms.
6. Naming a Minor as beneficiary: Despite your inclination to name children as beneficiaries, this can be problematic because minors cannot control funds.
7. Naming your spouse as beneficiary: There are valid reasons why you may not want to name your spouse as the beneficiary.
8. Not considering creditor protection: If you leave your IRA flat out to one of your children, creditors of that child can access that money. If you properly design a trust to be the beneficiary, you have a better chance of protecting that money from any judgment against the child you would have named as beneficiary.
9. Not using a revocable trust: if you have established a living trust, you can name it as the beneficiary to your retirement accounts. This way you can create a consistent distribution between retirement and non-retirement accounts, control of assets to minors, and potential creditor protection.
While these suggestions are a start, they do not apply to all situations. It is best to consult with competent counsel and figure out what beneficiary selection works best for you.
See Tom Fortino, Bulletproofing Your Beneficiaries, Fox Business, Oct. 1, 2012.
Special thanks to Brian Cohan (Attorney at Law, Law Offices of Brian J. Cohan, P.C.) for bringing this to my attention.