ATTENTION TO DETAIL! You would think that this space need not be taken up with a reminder of the obvious importance of beneficiary designations for life insurance policies and retirement accounts (qualified and non-qualified). But those of us who practice in the trusts and estates area are frequently reminded, through painful experiences with clients, that this topic is always relevant and often overlooked by clients and their financial advisors. Here is a checklist: (i) confirm that you have completed a beneficiary designation for every policy and account that is distributed by a beneficiary designation (v. your Last Will) at your death; (ii) confirm that the content of the beneficiary designation is consistent with your overall estate plan; (iii) keep copies of all of your beneficiary designations in a single file (digital or paper) and periodically review all of them, especially if there has been a change in your family situation (e.g., deaths, births, divorces) and/or estate planning goals; (iv) confirm with your tax advisor that your beneficiary designations achieve the most effective income tax result that is consistent with your overall planning; and (v) insure that changes of beneficiary designations submitted to the insurance company or retirement account custodian by you or advisors are actually accepted and recorded by that financial institution. One popular form of a “beneficiary designation” designed to avoid probate is a “transfer on death” (TOD) designation added to a bank or investment account that causes the account balance to be paid out directly to specifically named individuals and/or trusts. This can be a useful and “simple” technique in appropriate circumstances. But trusts and estates practitioners often discover following the owner’s death, when it’s too late to correct, that the TOD designation is inconsistent with the deceased owner’s overall estate planning goals and/or has avoidable adverse tax consequences. Be smart – pay attention to the details and consult with your tax and estate planning advisors if you have any doubts or questions.
If you have any questions, please contact Henry C. T. (Tip) Richmond, III in the Lexington, Kentucky office at 859-899-8712.